The US economy grew by 3.3 percent last year, ending fears of a recession

The U.S. economy grew much faster than expected in the final three months of last year, exceeding expectations as consumers and businesses continued to spend. America easily missed a recession – which many analysts had predicted was inevitable. Gross domestic product (GDP), a measure of all goods and services produced, rose 3.3 percent annually from October through December, the Commerce Department said Thursday. Analyst consensus was for growth of only 2 percent in the fourth quarter.

Wall Street's major indexes soared at the open as strong economic growth raised hopes of the likelihood of a rare “soft landing” – when inflation is curbed without a recession or a big rise in unemployment. The S&P 500, Nasdaq Composite and Dow Jones Industrial Average all opened in the green – after the S&P 500 closed at a new record high on Wednesday.

The pace was slightly lower than the 4.9 percent in the third quarter from July to September, which was due to a strong increase in consumer spending during the summer months. But the latest numbers reflect the surprising sustainability of the U.S. economy — and the American consumer's willingness to spend despite high interest rates and price levels.

It is the sixth consecutive quarter in which GDP has grown by 2 percent or more annually. In addition to better than expected GDP figures, there was also good news about inflation. A measure favored by the Federal Reserve — core personal consumption spending prices — rose 3.2 percent annually, up from 5.1 percent a year ago.

Beth Ann Bovino, chief economist at US Bank, told CNBC that the two sets of data — GDP and inflation — added together to form “supersonic Goldilocks” because it's a really strong number, but inflation hasn't shown up yet. 'Everyone wanted to have fun. People bought new cars, spent a lot on recreation and also went on trips. We've been expecting a soft landing for a while. This is just one step in that direction.”

In 2023 as a whole, the economy grew by 2.5 percent annually. This also comfortably exceeded Wall Street estimates and exceeded annual growth of 1.9 percent in 2022. Consumers also drove growth in the fourth quarter, as has been the case throughout the year.

Their spending rose 2.8 percent year-on-year from October to December, with people spending big on clothes, furniture, vehicles, hotels and eating out. Local, provincial and federal government spending also contributed to the growth. “The prospects are good that the economy will continue to perform well this year,” Scott Hoyt, senior director at Moody's Analytics, said in a news release.

“Consumers are doing their part and spending just enough to support broader economic growth.” The latest GDP figures show that the US is out of recession territory. Consumers are still spending, and a rebounding stock market has boosted U.S. retirement accounts.

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