US economy grew at 3.3% rate in fourth quarter

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The US economy grew at a 3.3 per cent annualised rate during the final quarter of last year, capping off a strong 2023 that defied recession fears.

The fourth-quarter growth rate was slower than the 4.9 per cent of the previous three months, but substantially higher than economists’ estimates. The 3.1 per cent figure for annual growth in gross domestic product also beat expectations.

US stocks and bond markets rallied on the data, as investors focused on figures showing that core PCE inflation remained at the Federal Reserve’s 2 per cent goal in the fourth quarter.

The figures add to evidence that the US economy has shown remarkable resilience in the face of the Fed’s lengthy campaign of high interest rates, paving the way for possible rate cuts in the coming months.

It also suggests the central bank may be on course to pull off a so-called soft landing, in which inflation is tamed without triggering a recession.

“This GDP reading cements America’s position as the dominant driver of global growth,” said Eswar Prasad, an economics professor at Cornell University.

He added that the US’s “unexpected standout performance is the economic story of 2023 and a positive omen for what is otherwise shaping up as a gloomy year ahead for global growth”.

Following the data release, US Treasuries extended the session’s rally, with the yield on the policy-sensitive two-year note down 0.04 percentage points to 4.34 per cent.

Wall Street’s S&P 500 was up 0.4 per cent shortly after Thursday’s opening bell, giving the benchmark index a chance at notching its fifth record high close in a row. The tech-heavy Nasdaq Composite gained 0.5 per cent.

Additional reporting by Stephanie Stacey and George Steer in London