The US economy grew faster than expected in the fourth quarter. For the year as a whole, the increase in gross domestic product was also higher than in 2022. Most experts do not expect a recession.
The economy in the USA performed significantly better than expected before the turn of the year – despite the high key interest rates. Gross domestic product (GDP) rose by an annualized 3.3 percent from October to December, the US Department of Commerce announced today in its first estimate. Economists surveyed by the Reuters news agency had only expected an increase of 2.0 percent, after an increase of 4.9 percent in the summer quarter.
Plus of 2.5 percent for the year as a whole
In the fourth quarter, it was once again consumers who increased their demand. Private consumer spending in the USA accounts for more than two thirds of economic output and grew by 3.1 percent. Exports even increased by more than six percent, and corporate investments increased by 1.0 percent despite high interest rates. Government spending also increased.
“The growth was broad-based,” commented Commerzbank economists Bernd Weidensteiner and Christoph Balz. According to the information, in times of high interest rates, there was enough growth of 2.5 percent in 2023 as a whole – after 1.9 percent in the previous year. For comparison: the German economy shrank by 0.3 percent last year.
However, the growth figures are not directly comparable. Because those in the USA are annualized: They indicate how much the economy would grow if the pace were to continue for a year. This approach is not used in Europe. To get a comparable growth rate, you would have to divide the US rate by four.
Experts and companies predict no deep recession
“The US economy continues to do very well in terms of growth,” said economist Bastian Hepperle from Hauck Aufhäuser-Lampe Privatbank. “But it will show a little less momentum soon.” Even if economic activity were to contract slightly in one of the coming quarters, that wouldn’t be a big deal. It should definitely be enough for a “soft landing,” said the expert.
The US Federal Reserve Bank is aiming for just such a soft landing – that is, an inflation-dampening slowdown in the economy without a profound economic downturn. According to economists, the world’s largest economy is unlikely to face a recession this year. Around 91 percent estimated a probability of 50 percent or less that the economy would slip into recession within twelve months.
A number of companies surveyed also cited the prospect of falling interest rates as a reason for their optimism, according to the Fed’s current economic report. The monetary authorities recently left interest rates unchanged. The key interest rate is currently in the range of 5.25 to 5.50 percent. However, inflation has tended to weaken in recent months, which is why economists expect a reduction in the second quarter.
Orders from US industry are just stagnating, the labor market is stable
In contrast to GDP, new business in US industry stagnated at the turn of the year. According to the Commerce Department, orders for durable goods such as aircraft and machinery in December were at the same level as the previous month. Economists polled by Reuters, however, had expected an increase of 1.1 percent, after a strong increase of a revised 5.5 percent in November.
The number of weekly initial claims for US unemployment benefits has risen surprisingly sharply. Last week, the number of applications for aid increased by 25,000 to 214,000, according to the Labor Ministry. Economists on average had expected an increase to 200,000. The previous week’s figure was revised from 187,000 to 189,000.
The number of applications remains at a rather low level, which indicates a robust labor market. The weekly initial claims are considered a timely indicator for the American job market. Although the latest economic data points to somewhat weaker economic development, the situation remains stable. The Fed takes the situation on the labor market into account in its monetary policy. After all, rising wages also drive price developments.