U.S. GDP unexpectedly grew by 3.3% last quarter. What this means for the Fed

globalnews.ca:

The nation’s economy grew at an unexpectedly brisk 3.3 per cent annual pace from October through December as Americans showed a continued willingness to spend freely despite high interest rates and price levels that have frustrated many households.

Thursday’s report from the Commerce Department said the gross domestic product — the economy’s total output of goods and services — decelerated from its sizzling 4.9 per cent growth rate the previous quarter. But the latest figures still reflected the surprising durability of the world’s largest economy, marking the sixth straight quarter in which GDP has grown at an annual pace of two per cent or more.

Consumers, who account for about 70% of the total economy, drove the fourth-quarter growth. Their spending expanded at a 2.8 per cent annual rate, for items ranging from clothing, furniture, recreational vehicles and other goods to services like hotels and restaurant meals.

The GDP report also showed that despite the robust pace of growth in the October-December quarter, inflationary measures continued to ease. Consumer prices rose at a 1.7% annual rate, down from 2.6% in the third quarter. And excluding volatile food and energy prices, so-called core inflation came in at a 2% annual rate.

The state of the economy is sure to weigh on people’s minds ahead of the November elections. After an extended period of gloom, Americans are starting to feel somewhat better about inflation and the economy — a trend that could sustain consumer spending, fuel economic growth and potentially affect voters’ decisions. A measure of consumer sentiment by the University of Michigan, for example, has jumped in the past two months by the most since 1991.

There is growing optimism that the Federal