US Q4 Economic Growth Hits 3.3%, Sharply Beats Estimates: Thursday's Economic Digest

The U.S. economy exhibited stronger-than-anticipated growth in the final quarter of 2023, albeit at a slower pace compared to the remarkable expansion in the third quarter, underscoring the nation’s robust economic resilience in the face of high borrowing costs.

Preliminary estimates from the U.S. Bureau of Economic Analysis (BEA) indicate that the U.S. gross domestic product (GDP) expanded at an annualized rate of 3.3% in the fourth quarter of 2023.

Additional data released on Thursday indicated that orders for durable goods in December missed economists’ expectations, suggesting a slowdown in manufacturing activity. Moreover, there was an uptick in jobless claims last week, which surpassed economist estimates

Thursday’s Economic Data: Key Highlights

• Q4 2023 GDP Tops Forecasts: The U.S. economy expanded an annualized 3.3% in the last three months of 2023, sharply surpassing the 2% predicted, but slowing from the 4.9% growth rate in Q3.
   
• Growth Drivers: “The increase in real GDP reflected increases in consumer spending, exports, state and local government spending, nonresidential fixed investment, federal government spending, private inventory investment, and residential fixed investment,” the BEA said. The slowdown in real GDP during the fourth quarter of 2023, compared to the third quarter, was mainly due to reduced growth in private inventory investment, federal government spending, residential fixed investment, and consumer spending. Additionally, there was a deceleration in imports.
  
• Manufacturing Orders Disappoint: In December 2023, new orders for manufactured durable goods remained unchanged on a month-on-month basis, marking a deceleration from the 5.5% growth observed in November, and missing market forecasts of a 1.1% expansion.
  
• Jobless Claims Rise: In the week ending January 20, the number of Americans filing for unemployment claims reached 214,000, a modest increase from the 189,000 claims filed in the preceding week. This figure was above the anticipated 200,000.

Before the release of the economic data, markets had assigned a 56% likelihood of no change in interest rates for March 2023. This was followed by expectations of six consecutive rate cuts, each amounting to 25 basis points (bps) by December 2024.

On Wednesday, data from the S&P Global’s Purchasing Managers’ Index (PMI) survey revealed that U.S. private sector activity in January exhibited the most robust pace of growth observed in the past seven months.

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