Economic growth crushes expectations to close out strong 2023

The U.S. economy grew 2.5 percent in 2023 and closed the year with slower but surprisingly strong growth, despite widespread fears of a recession.

U.S. gross domestic product (GDP) grew at an annualized pace of 3.3 percent during the fourth quarter of 2023, according data released Thursday by the Bureau of Economic Analysis (BEA).

Fourth-quarter growth far exceeded the projections of economists, who expected a 2 percent annualized quarterly gain, according to consensus estimates.

“Despite fears over a looming downturn, the U.S. economy continues to grow at an above-average pace as consumer spending remains resilient,” Jesse Cohen, global markets analyst at Investing.com, wrote in a post on X, the platform formerly known as Twitter.

“With that being said, some pockets of disinflation are starting to appear in the economy. What does the Fed do now?”

The data comes as President Biden and former President Trump dig in for a likely rematch in the November presidential election. Whether Biden or Trump wins could be heavily influenced by the state of the economy and how voters feel about it.

“Today we learned that the U.S. economy grew 3.1 percent over the past year while adding another 2.7 million jobs, and with core inflation moving back down towards the pre-pandemic benchmark. As a result, wages, wealth, and employment are higher now than they were before the pandemic,” Biden said in a statement.

Biden jabbed at “extreme Republicans” in his statement, pointing out proposed cuts to Social Security and Medicare that have been proposed. Congress has extended the federal government funding deadline three times since the initial deadline at the end of September, as a band of hard-line House Republicans pushes for major cuts to the federal budget.

Biden and Democrats are hopeful the sturdiness of the U.S. economy, falling inflation and rising consumer optimism will sell voters on “Bidenomics” and reverse dour economic approval numbers for the incumbent.

Trump, however, has predicted the U.S. economy will crash within the next 12 months, despite the recent spate of strong data. He also said he hopes a potential recession happens under Biden and and before Trump would take office if reelected.

“Whichever way you slice it, this report caps a year of stellar economic growth performance, particularly with the backdrop of the Fed’s aggressive monetary policy tightening cycle,” said Olu Sonola, head of U.S. regional economics at Fitch Ratings.

“The momentum of economic growth going into 2024 is looking very good and presents an upside risk to growth going forward, despite widespread expectation of a slowdown in 2024. The Fed will likely not be in a hurry to cut rates, if the data continues to come in this hot.”

Updated at 10:06 a.m. ET