The United States economy exhibited remarkable resilience as it closed out the year 2023 with a robust performance, surpassing earlier predictions. The advance estimate of the fourth-quarter Gross Domestic Product (GDP) revealed a surprising annualized growth rate of 3.3%, defying consensus forecasts that had anticipated a more modest 2%, according to data released by the Bureau of Economic Analysis.
“That is three years in a row of growing the economy from the middle out and the bottom up on my watch,” President Biden said in a statement this Thursday morning.
Key Contributors to Growth
The expansion in real GDP was fueled by notable increases across various sectors, including:
- Consumer Spending: Witnessed growth in both services and goods, with significant contributions from food services, accommodations, health care, and various goods categories.
- Exports: Marked increases in both goods and services, led by petroleum and financial services, respectively.
- Government Spending: Noteworthy rises in state and local government spending, nonresidential fixed investment, and federal government spending.
- Inventory Investment: Led by wholesale trade industries.
- Residential Fixed Investment: Driven by an increase in new residential structures.
However, it's essential to note that the positive momentum was partially offset by an increase in imports, which subtract from the GDP calculation.
Quarterly Performance and Deceleration
Compared to the third quarter of 2023, the fourth quarter exhibited a deceleration in real GDP, primarily attributed to slowdowns in private inventory investment, federal government spending, residential fixed investment, and consumer spending. Imports also decelerated during this period.
Overview of Current-Dollar GDP and Price Indices
The current-dollar GDP increased by 4.8% at an annual rate in the fourth quarter, reaching a level of $27.94 trillion. The price index for gross domestic purchases increased by 1.9% in the same period, reflecting a slight slowdown compared to the third quarter.
Personal Income and Saving Trends
Personal income exhibited a notable increase of $224.8 billion in the fourth quarter, primarily driven by rises in compensation, personal income receipts on assets, and proprietors' income. Disposable personal income increased by $211.7 billion, with real disposable personal income showing a substantial rise of 2.5%.
Despite the increase in personal income, personal saving slightly decreased to $818.9 billion in the fourth quarter, with the personal saving rate standing at 4.0% compared to 4.2% in the third quarter.
Annual Performance and GDP for 2023
Real GDP for the entire year of 2023 exhibited a noteworthy 2.5% increase compared to 2022. This growth was primarily driven by consumer spending, nonresidential fixed investment, state and local government spending, exports, and federal government spending.
While the increase in consumer spending was fueled by services and goods, the decrease in residential fixed investment was mainly attributed to a decline in new single-family construction and brokers' commissions.
Current-dollar GDP for 2023 increased by 6.3%, reaching a level of $27.36 trillion. The price index for gross domestic purchases increased by 3.4%, showing a moderation compared to the previous year.
Year-on-Year Growth and Price Index Trends
Measured from the fourth quarter of 2022 to the fourth quarter of 2023, real GDP increased by 3.1%. The corresponding price indices showed increases of 2.4% for gross domestic purchases, 2.7% for the PCE price index, and 3.2% for the PCE price index excluding food and energy.
This positive economic performance marks a promising outlook for the United States as it navigates through the intricate landscape of global economic dynamics.
