A Goldilocks Economy?

If this week's GDP report is any indication, it sure looks like it. GDP grew 3.3% in the fourth quarter of 2023, well above most forecasts and certainly better than my expectations.

Consumer purchases of goods and services and government services accounted for about three-quarters of the GDP increase. Much of this spending was fueled by debt and at least the consumer is probably close to being "tapped out".

Along with the strong GDP report, we also received some decent news on inflation with the Fed favorite, PCE Price index below 3% (latest twelve months) for both headline and core (2.6% and 2.9% respectively).

Here is an analysis from Mike Shedlock:

4th Quarter GDP Blows Past Consensus, Up a Strong 3.3 Percent

The Bloomberg consensus estimate for fourth-quarter GDP was 2.0 percent. Instead GDP rose 3.3 percent annualized.

MishTalkMike Shedlock

Increase in Real Spending Rose 5 Times the Increase in Real Disposable Income

Consumers went on a spending spree in December, dipping into savings or borrowing to do so.

MishTalkMike Shedlock

How Did Today’s Economic Data Impact Fed Rate Cut Odds?

Fourth-quarter GDP and consumer spending were both stronger than expected. Yet some analysts moved up the pace of Fed rate hikes. I went the other way, and so does the market.

MishTalkMike Shedlock

Remember, this was the first of three GDP reports and I suspect the final result will be materially different.