U.S. GDP Growth Accelerated and Inflation Slowed In 2023

Brian Turner
25 Jan, 2024
New York City

The U.S. economy expanded at a faster-than-expected pace of 3.3% in the final quarter of 2023, the U.S. Bureau of Economic Analysis reported Thursday.

The interest rate tightening campaign is taking a toll on economic growth, but tight labor market conditions are still supporting the increase in wage and consumer spending.

The annual pace of growth in the fourth quarter slowed from 4.9% in the third quarter, according to a preliminary estimate released by the government agency.

For the full year 2023, the U.S. economy expanded by 2.5% from the previous year after growing by 1.9% in 2022.

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.

Consumer spending slowed to 2.8% from 3.1% in the previous quarter, led by goods consumption rising by 3.8% compared to 4.9%, while consumption of services rose faster by 2.4% compared to 2.2%, led by food services, accommodations, and health care. 

In addition, private inventories added only 0.07 percentage points to growth, slower than 1.27 percentage points in the third quarter.

Government spending rose at a slower pace of 3.3% compared to a 5.8% increase in the previous quarter.

Imports, which are a subtraction in the calculation of GDP, increased.

Exports accelerated to an increase of 6.3% compared to 5.4% in the previous quarter, and imports grew less by 1.9% compared to 4.2%.

The price index for gross domestic purchases increased 1.9% in the fourth quarter, compared with an increase of 2.9% in the third quarter.

As a sign of decelerating inflation, the prices paid by consumers continued to rise at a slower pace.

The personal consumption expenditures (PCE) price index increased 1.7%, compared with an increase of 2.6%.

Excluding food and energy prices, the PCE price index increased by 2.0%, the same change as the third quarter.

The price index for gross domestic purchases increased 3.4% in 2023, compared with an increase of 6.8% in 2022.

The PCE price index increased 3.7%, compared with an increase of 6.5%. Excluding food and energy prices, the core PCE price index increased 4.1%, compared with an increase of 5.2%.