The U.S. economy exhibited stronger growth in the fourth quarter than initially estimated, with significant contributions from consumer spending and business investment in nonresidential structures. The Commerce Department's Bureau of Economic Analysis adjusted its growth rate for the last quarter to an annualized 3.4%, up from the 3.2% previously reported, indicating a resilient economy that continues to outshine its global counterparts.
This upward revision is primarily attributed to increased consumer spending, heightened nonresidential fixed investment, and augmented state and local government expenditure. These adjustments surpassed economists' expectations, who had anticipated that the growth rate would remain unchanged. Notably, this growth exceeds the Federal Reserve's non-inflationary growth benchmark of 1.8%, despite the central bank's significant interest rate hikes totaling 525 basis points since March 2022 aimed at curbing inflation.
Further insight into the economy's health is provided by the Gross Domestic Income (GDI), which expanded at a robust rate of 4.8%. This surge in GDI, particularly after a modest 1.9% increase in the preceding quarter, underscores higher wages and could alleviate some concerns regarding the disparity between GDI and GDP figures that previously suggested potential economic overestimation.
The labor market's resilience plays a pivotal role in underpinning the economy, maintaining elevated wage growth and driving consumer expenditure. Current growth estimates for the subsequent quarter are aligning around a 2.0% pace, indicative of sustained economic momentum.
Complementing the GDP data, a Labor Department report highlighted a decline in initial jobless claims, which dropped by 2,000 to a seasonally adjusted 210,000 for the week ending March 23. This figure slightly bested economists' predictions and reinforces the labor market's strength. The consistent claims range observed since February, coupled with most employers' inclination to retain workers despite some high-profile layoffs earlier in the year, further underscores the labor market's stability.
Moreover, the number of individuals receiving benefits after the initial week of aid, which serves as an indicator of hiring trends, saw a modest increase, suggesting continued labor market resilience.
