The U.S. economy grew at a solid pace in the final quarter of 2023, though the rate of expansion moderated from the previous period, newly released data from the Bureau of Economic Analysis showed. The nation's real gross domestic product (GDP) increased at an annual rate of 3.3% in the fourth quarter, down from a 4.9% growth rate in the third quarter.
The growth in the fourth quarter was broad-based, marked by increases in consumer spending, exports, state and local government spending, nonresidential fixed investment, federal government spending, private inventory investment, and residential fixed investment. However, the period also saw a rise in imports, which negatively impacts the GDP calculation.
Consumer spending, a key driver of the U.S. economy, showed robust gains in both goods and services. The services sector was buoyed by food services, accommodations, and health care, while the goods sector benefited from increases in pharmaceutical products, recreational goods, and vehicles. The export sector's growth was supported by stronger sales of petroleum products and financial services. State and local government spending growth was mainly attributed to higher employee compensation and investments in infrastructure. Nonresidential fixed investment saw a rise across intellectual property products, structures, and equipment.
The fourth quarter's GDP growth slowdown was largely due to decelerations in private inventory investment, federal government spending, residential fixed investment, and consumer spending, as well as a slowdown in imports.
The report also highlighted that current-dollar GDP rose 4.8% at an annual rate to $27.94 trillion in the fourth quarter, compared to an 8.3% increase in the third quarter.
On the inflation front, the price index for gross domestic purchases increased by 1.9% in the fourth quarter, a deceleration from the 2.9% rise in the previous quarter. The personal consumption expenditures (PCE) price index, which excludes volatile food and energy prices, mirrored this trend, increasing by 2.0%, unchanged from the third quarter's pace.
For the full year 2023, the U.S. economy grew 2.5%, an improvement from the 1.9% increase in 2022. This annual growth was primarily driven by consumer spending, nonresidential fixed investment, government spending, and exports, offset partly by declines in residential fixed investment and inventory investment. Imports saw a decrease over the year.
The 2023 annual price index for gross domestic purchases reflected a moderated inflation environment, rising 3.4% compared to a 6.8% increase in 2022. The PCE price index followed a similar pattern, increasing 3.7%, down from 6.5% in the previous year.
