U.S. GDP Revised Slightly Lower Despite Strong Consumer Spending
GDP rose at a revised annualized rate of 3.2% in the fourth quarter, compared with a prior estimate of 3.3%.
The U.S. economy expanded at a slightly slower rate at the end of last year, as a downward revision to inventories masked stronger household spending and investment.
Gross domestic product (GDP) rose at a revised 3.2 percent annualized pace in the fourth quarter, compared with a prior estimate of 3.3 percent. Consumer spending advanced at a 3 percent rate, faster than initially estimated, Bureau of Economic Analysis (BEA) figures showed Wednesday. Inflation was revised higher.
Across all of last year, the U.S. economy expanded 2.5 percent, marking an acceleration from 2022 and far outperforming the Eurozone and Japan.
| Metric, Q4/2023 | Revision | Initial Estimate |
|---|---|---|
| U.S. GDP | +3.2% | +3.3% |
| U.S. consumer spending | +3.0% | +2.8% |
| U.S. non-residential investment | +2.4% | +1.9% |
| U.S. residential investment | +2.9% | +1.1% |
| U.S. government spending | +4.2% | +3.3% |
The economy last year ended up surprising many economists, who expected the United States to slip into a recession after aggressive Federal Reserve interest rate hikes. Instead, a robust labor market supported consumer spending and kept the economy moving forward.
While economists largely expect growth to cool somewhat this year, as high borrowing costs restrain household demand and business investment, they still expect the U.S. to avoid a downturn.
Inflation-adjusted final sales to private domestic purchasers, a key gauge of underlying demand, increased more than initially estimated.
“This all points to more domestic demand growth than previously thought and a hotter economy in general,” James Knightley, chief international economist at ING, said in a note.
The Fed’s preferred inflation metric—the personal consumption expenditures (PCE) price index—rose at a 1.8 percent annual rate in the fourth quarter. Excluding food and energy, the gauge increased at a 2.1 percent pace, the BEA report showed. Both were marginally higher than initially estimated.
Inventories subtracted 0.27 percentage point from GDP, compared with a slight boost in the initial fourth-quarter estimate. Personal consumption added 2 points. Spending was revised up on the back of more outlays for services.
A separate report out Wednesday showed the widest U.S. merchandise-trade deficit in six months. The January shortfall reflected a pickup in imports.
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