On the eve of this year’s first central bank meeting, in Washington this week, the Commerce Department revealed the US economy grew 3.3 percent during the last quarter of last year, equivalent to 3.1 percent for the whole year. Better still was the fact that this vigorous expansion was accomplished with declining inflation, low unemployment and real wage increases, supporting consumer spending growth at an annual rate of 2.8 percent.
The main contributor to the expansion was consumer spending, with almost 2 percent of the quarterly growth figure, while net exports and government spending contributed around half of a percentage point each.
At the same time, the Commerce Department revealed that the personal consumption expenditures price index, in the last quarter of 2023, decreased to an annual rate of 1.7 percent, after an increase of 2.6 percent in the third quarter.
These end of year figures confirm the accomplishment of a “soft landing,” whereby inflation has declined with low unemployment. The question is when the central bank will judge convenient to start dismantling the restrictive posture which has contributed to the outcome. Perhaps an early signal may come after the end of this week’s meeting, considering among other factors that we are entering an election year.
