U.S. Economy Slows in Q4 to 0.7%, 2023 Growth Revised Lower

The U.S. economy grew at an annualized rate of 0.7% in the fourth quarter, the Commerce Department’s Bureau of Economic Analysis said, halving from a 1.4% flash estimate released last month. The growth rate also came in below the Dow Jones consensus of 1.5%.

For the full year, annual GDP rose 2.1%, revised down by 0.1 percentage point from an earlier estimate. The BEA put the 2024 growth rate at 2.8%. In the third quarter, growth was previously reported at 4.4%.

The slower fourth quarter is viewed as the result of the economy contending with high interest rates and cooling consumer demand. Personal consumption expenditures, a key driver of U.S. growth, rose at a 2.0% annualized pace in the fourth quarter, compared with the flash estimate of 2.4%. Business fixed investment and housing indicators also weakened.

The BEA also cites the temporary federal government shutdown as a factor weighing on growth. The shutdown, which began on October 1, lasted 43 days, according to the report, and is considered to have dampened federal spending and broader activity.

Inflation remained a concern. The January personal consumption expenditures price index rose 2.8% from a year earlier, slightly below economists’ average forecast of 2.9%.

What this means for the United States and global markets is usually tied to the Federal Reserve’s policy path. Slower growth alongside inflation still above the Fed’s 2% target can influence expectations for interest-rate decisions, and by extension, financial markets, the dollar, and funding costs for companies and governments abroad.

For international readers, the figures illuminate how U.S. demand shapes global supply chains, technology and manufacturing activity, and the outlook for consumer goods prices worldwide. They also highlight how political events at home, such as a government shutdown, can echo through markets and trade partners. The BEA’s quarterly growth releases, including the PCE inflation measure, are widely watched indicators of the health of the world’s largest economy and a key driver of global economic sentiment.