US economy grew above expectations in the fourth quarter

The US economy grew faster than expected in the fourth quarter, driven by strong consumer spending, increased exports, more government spending, and a pickup in business investment.

The gross domestic product increased at a 3.3% annualized rate in Q4, surpassing expectations and following a robust 4.9% pace in the third quarter.

The growth for the full year came in at 2.5%, which is a positive sign for the overall economic performance.

Despite concerns about inflation, the fourth-quarter GDP report showed inflation pressures dropping further. This indicates that, for now, the US central bank may not be inclined to start cutting interest rates in March.

The Federal Reserve had aggressively raised interest rates in response to economic conditions, and the recent strong economic performance suggests that cutting interest rates in March may not be imminent however, the possibility of rate cuts later in the year remains on the table.

The economy is expanding at a pace above what Federal Reserve officials consider the non-inflationary growth rate, which is around 1.8%. This suggests that the current growth is robust without posing immediate inflationary risks.

The strength of the economy is attributed in part to the resilience of the labor market, marked by low layoffs and strong wage gains. This resilience is supporting consumer spending, a key driver of economic growth.

The overall growth for the year accelerated from 1.9% in 2022, marking the fastest growth in two years.