US GDP exceeds expectations with 3.3% growth in Q4
The US economy showed its strength in the last quarter of 2023 with a GDP growth of 3.3%, convincingly beating the 2% prediction. This growth was fueled by a strong job market, consumer spending, exports, state and local government spending, residential/non-residential fixed investment, federal government spending, and private inventory investment. As per the Commerce Department, the full-year growth was 2.5%.
Which sectors contributed to better-than-expected economic growth in US?
According to the Commerce Department, the rise in consumer spending came from both services and goods. Food services, accommodations, and healthcare were the main contributors within the services sector. Meanwhile, pharmaceutical products and recreational goods and vehicles drove the growth in goods. The economic data additionally reinforces the notion that the US is experiencing a "soft landing," wherein elevated interest rates result in a decrease in inflation without inducing a detrimental recession.
Economy remained resilient, despite concerns about a possible recession
Initially, analysts anticipated a slowdown in consumer spending in 2023 due to diminished savings stemming from the COVID-19 pandemic and high borrowing costs. Despite apprehensions regarding a potential recession, the economy has proven to be resilient, notably in the labor market.
ECB holds interest rates steady amid US growth
Separately, the European Central Bank (ECB) chose to keep interest rates steady for the third time in a row, with its benchmark deposit rate remaining at a historic high of 4%. This decision came after a series of rate hikes aimed at controlling price surges following Russia-Ukraine war. The ECB's governing council stated that they believe rates are at levels that "maintained for a sufficiently long duration, will make a substantial contribution" to bringing inflation back to their 2% target.
