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The US economy reported a growth rate of 3.2% Q4 CY2023 lower than 3.3% estimated earlier. The economy had depicted a strong growth rate of 4.9% in Q3 CY2023. The country has been growing above 2.0% for six straight quarters defying fears of high interest rates impacting growth prospects. Consumer spending on the back of a strong labour market has benefitted overall growth prospects of the US economy. The US economy has depicted stable growth prospects in the last few quarters. Furthermore, the CPI continues to remain above Fed’s target of 2.0%. The economic fundamentals marked by firm growth and elevated inflation is likely to delay interest rate cut until the next three months. 

For the full year, the economy expanded by 2.5% in CY2023 as against 1.9% in CY2022.

Performance in detail

* Consumer spending, the main engine of the economy, grew by 3.0% in Q4 CY2023 largely unchanged from 3.1% in the previous quarter.

* Gross domestic private investment grew below 1.0% because of a decline in private capital expenditure plans. Companies also rebuilt inventories at a slower pace due to large unsold goods.

* Government spending remained buoyant at 4.2% this quarter as compared with 5.8% in the previous quarter.

* Healthy export growth at 6.4% in Q4 CY2023 up from 5.4% in Q3 CY2023 also supported overall growth.

Conclusion:

Looking ahead, the US consumer price index grew by 3.1% in Jan'2024 down from a peak of 9.1% in Jun'2022. The CPI has been moving closer to the Fed's target of 2.0%. Given the same, the US Fed is largely expected to cut interest rate in the upcoming quarters if inflation continues to decline. A possible easing of borrowing costs is foreseen to augment consumption and investment demand, helping overall GDP growth.

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