US fourth-quarter GDP revised upward; weekly jobless claims decline

The latest data from the Commerce Department's Bureau of Economic Analysis showed that the US economy expanded at a faster pace than previously estimated in the fourth quarter of last year. The upward revision was attributed to robust consumer spending and increased business investment in non-residential structures such as factories.

Gross domestic product (GDP) grew at 3.4 per cent in the last quarter of 2023, up from the previously reported 3.2 per cent pace. The revision reflected improvements in consumer spending, non-residential fixed investment, and state and local government spending. Economists had expected that GDP growth would remain unchanged.

The US economy's expansion above the non-inflationary growth rate, as recognised by Federal Reserve officials, coupled with its outperformance compared to global peers, has persisted despite interest rate hikes by the central bank since March 2022 to combat inflation.

From the income side, the economy saw a robust growth rate of 4.8 per cent. Gross domestic income (GDI) expanded at a 1.9 per cent pace in the previous quarter. While GDP and GDI ideally should align, differences arise due to variations in data sources used for estimation.

The widening gap between GDI and GDP in prior quarters had raised concerns among economists regarding the true strength of the economy. The surge in GDI, driven by higher wages, has alleviated some of these concerns.

The resilient labour market has been a key driver of economic stability, maintaining elevated wage growth and fuelling consumer spending. Growth projections for the first quarter are converging around a 2.0 per cent pace.

In addition to the positive GDP revisions, a separate report from the Labour Department indicated a decline in initial claims for state unemployment benefits. Initial claims dropped by 2,000 to a seasonally adjusted 210,000 for the week ending March 23, slightly lower than economists' expectations.

Despite fluctuations, jobless claims have remained within a relatively narrow range since February, reflecting employers' efforts to retain their workforce despite sporadic layoffs earlier in the year.

(With Reuters inputs)