Well, that was unexpected.
The nation’s economy grew at a 3.3% annual rate in the last quarter, with Americans showing a continued willingness to spend freely despite high interest rates and price levels that have frustrated many households.
Thursday’s report from the Commerce Department said the gross domestic product decelerated from its 4.9% growth rate the previous quarter, the Associated Press reported. It’s the sixth straight quarter in which GDP has grown at an annual pace of 2% or more.
Consumers spending expanded at a 2.8% annual rate, for items ranging from clothing, furniture, recreational vehicles and other goods to services like hotels and restaurant meals, according to the AP.
The GDP report also showed that despite the robust pace of growth in the October-December quarter, inflationary measures continued to ease. Consumer prices rose at a 1.7% annual rate, down from 2.6% in the third quarter. And excluding volatile food and energy prices, so-called core inflation came in at a 2% annual rate.
Nathan Sheets, global chief economist at Citi, told the AP that recent experience suggests economic growth can remain solid even as inflation cools.
“It underscores for the Fed that they don’t have to be in a hurry” to ease borrowing rates to aid the economy, said Sheets, who thinks the first rate cut will occur in June.
The economy has repeatedly defied predictions that the Fed’s aggressive rate hikes would trigger a recession. Far from collapsing last year, the economy accelerated — expanding 2.5%, up from 1.9% in 2022, according to the AP report. “Our expectation is for a soft landing, and it looks like things are moving that way,’’ Beth Ann Bovino, chief economist at U.S. Bank, told AP. Despite that, Bovino expects the economy to slow somewhat this year as higher rates weaken borrowing and spending. “People are going to get squeezed.”
