February 28, 2024

By PAUL WISEMAN | AP Economics Author

WASHINGTON — The nation’s economic system grew at an unexpectedly brisk 3.3% annual tempo from October by December as People confirmed a continued willingness to spend freely regardless of excessive rates of interest and worth ranges which have annoyed many households.

Thursday’s report from the Commerce Division mentioned the gross home product — the economic system’s complete output of products and companies — decelerated from its scorching 4.9% progress price the earlier quarter. However the newest figures nonetheless mirrored the shocking sturdiness of the world’s largest economic system, marking the sixth straight quarter by which GDP has grown at an annual tempo of two% or extra. Customers fueled a lot of final quarter’s growth.

For all of 2023, the economic system grew 2.5%, up from 1.9% in 2022.

The state of the economic system is bound to weigh on folks’s minds forward of the November elections. After an prolonged interval of gloom, People are beginning to really feel considerably higher about inflation and the economic system — a development that would maintain shopper spending, gasoline financial progress and probably have an effect on voters’ selections. A measure of shopper sentiment by the College of Michigan, for instance, has jumped prior to now two months by essentially the most since 1991.

There may be rising optimism that the Federal Reserve is on monitor to ship a uncommon “comfortable touchdown” — elevating borrowing charges sufficient to chill progress, hiring and inflation but not a lot as to ship the economic system right into a tailspin. Inflation touched a four-decade excessive in 2022 however has since edged steadily decrease with out the painful layoffs that almost all economists had thought can be essential to gradual the acceleration of costs.

The economic system’s outlook had appeared far bleaker a yr in the past. As just lately as April 2023, an financial mannequin printed by the Convention Board, a enterprise group, had pegged the chance of a U.S. recession over the subsequent 12 months at near 99%.

At the same time as inflation in america has slowed considerably, general costs stay almost 17% above the place they had been earlier than the pandemic erupted three years in the past, which has exasperated many People. That reality will possible increase a pivotal query for the nation’s voters, a lot of whom are nonetheless feeling the lingering monetary and psychological results of the worst bout of inflation in 4 many years. Which is able to carry extra weight within the presidential election: The sharp drop in inflation or the truth that most costs are effectively above the place they had been three years in the past?

The Fed started elevating its benchmark price in March 2022 in response to the resurgence in inflation that accompanied the economic system’s restoration from the pandemic recession. By the point its hikes resulted in July final yr, the central financial institution had raised its influential price from close to zero to roughly 5.4%, the best stage since 2001.