By The Smartencyclopedia Staff & Agencies

WASHINGTON, Feb 28  – The U.S. economy appears to be on a firmer footing heading into the first quarter, with the Commerce Department slightly trimming the fourth-quarter Gross Domestic Product (GDP) growth to a 3.2% rate. Despite the revision, the economic composition revealed a more robust picture than initially anticipated, providing a positive outlook for the near term, even as the country faced a weak start due to freezing temperatures.

The revision in GDP growth, released on Wednesday, was primarily attributed to a downgrade in inventory investment. However, this was offset by upgrades in consumer spending, state and local government investment, as well as residential and business outlays.

The economy’s resilience comes in the face of earlier warnings about a possible recession after the Federal Reserve implemented aggressive interest rate hikes to control inflation. The tight labor market, sustaining elevated wages and supporting consumer spending, has played a crucial role in preventing the feared economic downturn.

Ryan Sweet, Chief U.S. Economist at Oxford Economics, remarked, “Though weather wreaked havoc on some of the data for January, risks are still weighted toward the upside for growth early this year.” He added, “A weather-related rebound in activity in February, coupled with a recent surge in tax refunds, should provide a boost to growth in retail sales.”

According to the second estimate of fourth-quarter GDP growth by the Commerce Department’s Bureau of Economic Analysis, the economy expanded at a 3.2% annualized rate, slightly down from the previously reported 3.3% pace. This revision was in line with economists’ expectations. Private inventory investment saw a notable adjustment, estimated to have increased at a rate of $66.3 billion instead of the initially reported $82.7 billion pace.

In terms of contributions to GDP growth, consumer spending, representing over two-thirds of U.S. economic activity, played a significant role. It increased at a 3.0% rate, contributing two percentage points to the overall GDP growth. This marked an upward revision from the earlier estimate of a 2.8% pace.

The U.S. economy demonstrated a robust performance in the July-September quarter, growing at a 4.9% pace. The overall growth for the year 2023 was 2.5%, showcasing an acceleration from 1.9% in 2022. This growth is notably above the Federal Reserve’s non-inflationary growth rate benchmark of 1.8%.