U.S. Growth Slows 3.3%, But Resilience Shines Through

• Initial recession predictions due to high-interest rates and reduced borrowing did not materialize, defying expectations.
• Despite a slowdown in GDP growth from the previous quarter, the U.S. economy has exhibited resilience, growing at an annual pace of around 2% for six consecutive quarters.
• The ongoing economic recovery, characterized by declining inflation and consistent consumer spending, challenges the earlier pessimistic outlook and raises questions about the factors influencing the upcoming presidential election.

The U.S. economy was predicted to have entered a recession by now due to a decline in borrowing and expenditure due to the highest interest rates in twenty years.

Rather, the American economy has continued to grow. What's even more heartening is that inflation, which peaked in 2022 and has been declining ever since, has done so without the devastating job losses that most analysts had said would be required to stop the price explosion.

The country's gross domestic product, or the overall production of goods and services produced by the economy, is predicted to have increased at an annual pace of around 2% between October and December, according to a report anticipated from the Commerce Department on Thursday.

This would represent a slowdown from the robust 4.9% growth rate observed in the July-September quarter. Even yet, it would represent the sixth consecutive quarter in which GDP has grown at a strong annual pace of 2% or more, demonstrating the surprisingly resilient nature of the greatest economy in the world. Consistent consumer spending, which powers over two-thirds of the economy, has contributed to this expansion.

Read Also: Core Inflation Holds Steady at 3.9%, But Headline Rate Rises as Housing and Energy Bite

Economic Turnaround and the Shift in Recession Predictions

A year ago, the economic prognosis was far more dire. A corporate organization called the Conference Board released an economic forecast as recently as April 2023 that estimated the probability of a U.S. recession over the next year at around 99%.

Many people were afraid that the Federal Reserve's many interest rate increases, which were intended to control inflation, would severely reduce borrowing and spending and lead to a severe recession. That is usually what has happened when the country's central bank has aggressively raised interest rates in an effort to combat inflation.

There is now increasing hope that the Fed would perform a rare "soft landing," increasing borrowing rates just enough to restrict hiring and GDP while containing price hikes and preventing a financial meltdown. That forecast would be supported by the GDP growth slowing down during the most recent quarter.

Many Americans are unhappy because, despite a dramatic slowdown in inflation, total costs are still around 17% higher than they were prior to the pandemic's outbreak three years ago.

For the citizens of the country, many of whom are still suffering from the psychological and financial fallout from the greatest inflation in four decades, that reality is likely to pose a crucial question. The huge decline in inflation or the reality that most prices have increased significantly over the past three years will be more significant factors in the presidential election.

Related Article: Fed Plots Inflation Takedown, But Can Growth Survive the Landing?