US economic growth slows in Q4 2023

03 Mar '24

2 min read

Pic: Adobe Stock

Insights

In Q4 2023, the US GDP growth slowed to 3.2 per cent from 4.9 per cent in Q3 2023, with a yearly expansion of 2.5 per cent over 2022's 1.9 per cent.
Consumer spending and government investments drove growth.
Current-dollar GDP reached $27.94 trillion, with a minor rise in inflation indicators.
Personal income increased, though savings dipped.

The US economy witnessed a deceleration in its growth rate during the fourth quarter (Q4) of 2023, with the real gross domestic product (GDP) increasing at an annual rate of 3.2 per cent, according to the Bureau of Economic Analysis (BEA). This represents a slowdown from the 4.9 per cent growth rate observed in the third quarter. The ‘second’ estimate for Q4 2023 saw a slight adjustment from the initial 3.3 per cent growth estimate, primarily due to a downward revision in private inventory investment, partially offset by increased state and local government spending and consumer expenditure.

Despite the quarter-on-quarter slowdown, 2023 saw the US economy expand by 2.5 per cent, marking a solid improvement over the 1.9 per cent growth in 2022. The annual growth was fuelled by significant contributions from consumer spending, non-residential fixed investment, and government spending, although it was somewhat offset by decreases in residential fixed investment and private inventory investment.

In Q4 2023, consumer spending and exports played pivotal roles in driving economic expansion, alongside state and local government spending and non-residential fixed investment. However, the growth was tempered by a downturn in private inventory investment. Moreover, imports, which negatively impact GDP calculations, increased during the quarter, as per the bureau.

The year also recorded a 4.9 per cent increase in current-dollar GDP, reaching $27.94 trillion, with the price index for gross domestic purchases rising by 1.9 per cent. The personal consumption expenditures (PCE) price index, a key indicator of inflation, saw a 1.8 per cent increase, indicating a slight uptick in inflationary pressures.

On the income front, current-dollar personal income rose by $219.5 billion in Q4 2023, although disposable personal income and personal saving experienced downward revisions from previous estimates. The personal saving rate also saw a slight decline.

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