The U.S. economy exceeded expectations in the fourth quarter of 2023, as revealed by the Commerce Department in a report released on Thursday. Revised data showed that real GDP grew by 3.4 percent, higher than the previously reported 3.2 percent increase. Economists had anticipated that the GDP growth rate would remain unchanged.

Despite the upward revision, the GDP growth in the fourth quarter marked a notable slowdown from the 4.9 percent increase seen in the third quarter. This deceleration was largely due to a downturn in private inventory investment, as well as slowdowns in federal government spending and residential fixed investment.

The report highlighted that GDP growth in the fourth quarter was driven by increases in consumer spending, state and local government spending, exports, nonresidential fixed investment, federal government spending, and residential fixed investment. However, these positive contributions were partly offset by a decrease in private inventory investment and an increase in imports, which subtract from the GDP calculation.

On the inflation front, consumer prices in the fourth quarter remained unchanged at 1.8 percent. However, core prices, excluding food and energy, were downwardly revised to 2.0 percent from 2.1 percent. Despite expectations of slowing growth in the first quarter, economists anticipate that the economic backdrop will remain supportive for markets.

Sam Millette, Director of Fixed Income for Commonwealth Financial Network, noted that