The U.S. economy did exceptionally well in 2023, defying expectations. Instead of a slower growth period to control inflation, the economy grew faster than anticipated, and inflation decreased. The latest report shows a robust 3.3% growth in the last quarter of 2023, surpassing the expected 2%. This comes after a strong 4.9% growth in the previous quarter.
Various sectors contributed to this growth: consumers spent more, and businesses invested in equipment and facilities. The surprising part is that this accelerated growth happened while inflation cooled down.
For the past two years, officials believed slower growth was needed to control inflation. Now, they face the decision of whether to reduce interest rates, essentially claiming victory over inflation, even though the expected slower growth didn't occur.
Factors like a thriving job market, increased productivity, and improvements in the supply side (more workers joining the workforce) have allowed the economy to grow well without causing a spike in prices. The Federal Reserve Chair, Jerome Powell, acknowledged the unexpected strength, attributing it to significant gains in the supply side and strong demand.
In summary, the U.S. economy surprised everyone with strong growth and reduced inflation in 2023, challenging conventional expectations. This is seen as a positive outcome, with economists highlighting the potential for robust growth with lower inflation, comparing it to the successful economic period in the 90s.
For more details click here.
source: axios.com
