The American economy grew at an annual rate of 3.2 per cent in the fourth quarter of 2023, according to the ‘second’ estimate released on Wednesday (February 28) by the Bureau of Economic Analysis (BEA).

The increase in the fourth quarter primarily reflected increases in consumer spending, exports, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased. 

During the third quarter, real gross domestic product (GDP) increased 4.9 per cent. 

• The increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors were healthcare, food services and accommodations, and other services (led by international travel). Within the goods subdivison, the leading contributors to the increase were other nondurable goods (led by pharmaceutical products) as well as recreational goods and vehicles.
   
• The increase in exports reflected increases in both goods (led by petroleum) and services (led by financial services).
   
• The increase in state and local government spending reflected increases in both investment (led by structures) and consumption expenditures (led by compensation of employees).

Compared to the third quarter, the deceleration in GDP in the fourth quarter primarily reflected a downturn in inventory investment and decelerations in federal government spending, housing investment, and consumer spending. Imports decelerated.

Prices

Gross domestic purchase prices, the prices of goods and services purchased by U.S. residents, increased 1.9 per cent in the fourth quarter after increasing 2.9 per cent in the third quarter. 

Excluding food and energy, prices increased 2.1 per cent after increasing 2.5 per cent.

Personal consumption expenditures (PCE) prices increased 1.8 per cent in the fourth quarter after inching 2.6 per cent higher in the third quarter. Excluding food and energy, the PCE “core” price index increased 2.1 per cent, after rising 2.0 per cent in the third quarter.

Personal income and saving

Real disposable personal income (DPI)—personal income adjusted for taxes and inflation—increased 2.2 per cent in the fourth quarter after increasing 0.5 per cent (revised) in the third quarter.

Current-dollar DPI increased 4.0 per cent in the fourth quarter, following an increase of 3.1 per cent (revised) in the third quarter. The increase in the fourth quarter reflected increases in compensation, personal income receipts on assets, and proprietors’ income that were partly offset by a decrease in personal current transfer receipts.

Personal savings as a percentage of DPI was 3.9 per cent in the fourth quarter, compared with 4.3 per cent (revised) in the third quarter.

Updates to GDP

The update from the “advance” estimate reflected downward revisions to inventory investment and federal government spending that were partly offset by upward revisions to state and local government spending, consumer spending, housing investment, business investment, and exports. Imports were revised up.

Year 2023 highlights

Real GDP increased 2.5 per cent compared to an increase of 1.9 per cent in 2022. The increase primarily reflected increases in consumer spending, business investment, state and local government spending, exports, and federal government spending that were partly offset by decreases in housing investment and inventory investment. Imports decreased.