- The US economy showed a stronger-than-expected growth in the Q4, despite economic slowdown signs.
- The Gross Domestic Product (GDP) increased annually by 3.3% at the end of December 2022.
- Consumer spending largely drove this growth, with Charles Schwab classifying it as “remarkable”.
- The Federal Reserve aims to tame inflation, with a possible “soft landing” in sight.
- GDP figure and inflation rate data may influence future decisions on rate cuts in 2024.
- The US stock markets witnessed a rally, with the CME Group predicting the first rate cut in May.
Impressive US Economic Growth
The US sustained a vigorous economic pace in Q4, outperforming predictions and reflecting resilience despite the potential deceleration towards pre-pandemic rates.
GDP Expansion Analysis
Gross Domestic Product (GDP) grew at an annual pace of 3.3% from October to December, a reduction from the 4.9% in the preceding quarter. This was a preliminary analysis by the Commerce Department, surpassing economists’ estimates of 2.0% growth.
Consumer Spending and Economic Resilience
Mainly, consumer expenditure for goods and services boosted growth, says Kathy Jones, Chief Fixed Income Strategist at Charles Schwab (NYSE:). On a year-to-year measurement, GDP marked a 3.1% ascension, showing signs of the economical strength of America regardless of historical interest rate peaks. The annual number rose by 2.5%, up from 2019’s 1.9%. Jones lauded this performance as “extraordinary”, given the skyrocketing borrowing expenses.
A Look at 2023
The Federal Reserve started 2023 with concerns about tighter financial situations aimed at controlling inflation towards a 2% target. However, data released on Thursday indicates that the US remains in line for a so-called “soft landing”. This will allow the Federal Reserve to suppress price increases without causing an economic crisis.
Rate Cuts in 2024
While the Federal Reserve is expected to stand pat with borrowing costs at a 20-year high of 5.25% to 5.50% by its upcoming policy meeting this month, GDP and inflation-related data this week may influence how policymakers shape up potential rate cuts in 2024.
Indications of an enduring solid economy and abating inflation may convince the Federal Reserve that a swift move to decrease borrowing expenses isn’t necessary. The CME Group’s (NASDAQ:) widely-observed FedWatch Tool now anticipates the first decrement in May. Markedly, U.S. stocks witnessed ascension in early trading post this disclosure.
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These economic growth figures and projections have considerable influence on forex and trading, impacting assets linked with the US economy.