US economic growth beats forecasts at 3.3% but rate cuts uncertainty lingers
The Fed will likely delay the timing of the first cut further, potentially clashing with the presidential election in November.
GDP growth slowed from 4.9% in the third quarter, with the agency noting that a slowdown in private inventory investment, federal government spending, residential fixed income and consumer spending were contributing factors, while imports decelerated as well.
The fourth-quarter figure was higher than what markets had forecast, with economists expecting US GDP to come in at 2% for the last three months of 2023.
The BEA also found current-dollar GDP increased 4.8% over the last quarter of the year to $27.9trn, compared to an 8.3% rise in the third quarter.
Market remains bullish on rates cuts despite US inflation uptick
Overall, US GDP grew by 2.5% in 2023, up from 1.9% in 2022, highlighting the US' growth trajectory despite the fourth-quarter slowdown, with Lindsay James, investment strategist at Quilter Investors, deeming it «anything but sluggish».
She said today's figures showed the US economy is not «grinding to a halt» with recessionary fears remaining on hold for the time being.
«That would normally be considered very good news, but the market desires rate cuts and it wants them sooner rather than later,» she added.
All eyes will be on the upcoming US inflation data, James argued, as investors will want to see if last month's uptick in CPI «was a blip», which will put the Federal Reserve under pressure.
However, she noted that with growing real disposable incomes — 2.5% in the fourth quarter, up from 0.3% in the third quarter — the Fed will likely delay the timing of the first cut further, potentially clashing with the presidential election in November.
'Stronger than expected' US jobs
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