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GDP Increased 3.1% in 2023 as Consumers Kept Spending

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America’s economy grew 3.1% in 2023 amid continued consumer spending on vehicles and electronics.

That’s according to figures released Thursday (Jan. 25) by the Commerce Department, which also showed the economy growing at 3.3% during the fourth quarter of the year.

The findings show an increase in consumer spending for the year driven by healthcare, recreational goods and vehicle spending.

For the fourth quarter, “the leading contributors were food services and accommodations as well as health care,” along with an uptick in spending on pharmaceutical products and computer software, the Commerce Department said.

“It’s been a really strong year for economic growth,” James Knightley, chief international economist at ING, told The Wall Street Journal (WSJ). “The consumer was meant to roll over—and they didn’t.”

The WSJ report notes that the figures contrast with economists’ expectations from last year, when they forecast a recession for 2023.

But while consumer spending might have remained resilient last year, recent data from the Federal Reserve indicates the picture may not be that rosy, as PYMNTS wrote last week.

The Fed reported that “average perceived probability of missing a minimum debt payment” over the next three months rose by 0.6% to 12.4%.

And PYMNTS has found that consumers have had to dip into their savings to combat inflation, and turned to credit to help finance their holiday spending plans. In addition, the Fed has also recently reported that just two-thirds of consumers felt prepared to handle an unexpected $2,000 expense.

“So while inflation expectations may be coming down, there are other factors at play determining just how resilient consumer spending will be in the months ahead,” PYMNTS wrote.

Meanwhile, the World Bank last week released its semiannual Global Economic Prospects report, which warned that the 2020s are shaping up to be a “decade of wasted opportunity,” with an economy that’s decidedly worse than the decade that came before it.

In the immediate future, the World Bank forecast that the growth in world output during 2024 will decline from 2.6% to 2.4% — the third consecutive year of slowing.

“Downside risks to the outlook predominate,” wrote the World Bank, noting that “inflation remains above target in most advanced economies.”