Business investment and consumer spending drove the economy to grow by 3.3% in the fourth quarter of 2023.
Why it matters: The chances of a recession caused by higher interest rates needed to fight inflation have declined.
By the numbers:
- Consumer spending rose 2.8% with strong increases for both goods and services.
- Business investment and residential housing both grew stronger than anticipated, increasing by 1.7% and 1.1% respectively.
Looking ahead: Growth this year may not be as strong as in 2023, but the economy should still grow at or above 1% in all four quarters.
Dig deeper: What to Expect from the Economy in 2024
Business Drives Stock Market to Record Highs
January 24, 2024
The S&P 500 recently hit an all-time high, and the stock market in general has been performing well.
Why it matters: Companies investing in their businesses – which will lead to stronger growth – are making financial markets look past any possible economic hiccups in 2024.
Be smart: The markets see businesses adding workers, raising wages, and spending to better serve their customers.
Looking ahead: One risk that could deflate the stock market’s optimism is a government shutdown. Congress still needs to pass budgets for fiscal years 2024 and 2025. Washington must work on a government funding plan.
Consumer Spending Continued in December
January 19, 2024
Consumers kept spending at a strong pace. Retail sales rose 0.6% in December, double the 0.3% increase in November.
Why it matters: Analysts have been waiting for consumer spending to weaken, mostly because of depleted savings and rising credit card balances. That hasn’t happened because of the strength of the jobs market and strong wage growth.
Be smart: Spending was strong across the board in December, with auto sales and online spending leading the way.
Big picture: As long as the job market remains robust, and incomes steady, consumers will have money to keep spending.
Stubborn Inflation Stays Above Federal Reserve’s Target
January 17 2024
Taming inflation continues to be a challenge. The Consumer Price Index, the broadest measure of consumer prices, rose 3.4% annually in December. This is up from 3.1% in November. On a monthly basis, inflation was up 0.3%.
Why it matters: Inflation is still above the Federal Reserve’s 2% target but down from its peak of 8.8% in June 2022.
Be smart: The Fed looks closely at core prices, which strip out volatile items like food and energy. Core prices rose 3.9% on an annual basis and 0.3% from November to December.
Looking ahead: Even with the bump in inflation the Fed will likely hold interest rates where they are to allow more time for its previous rate increases to lower inflation.
Labor Force Shrinks in December
January 10, 2023
December’s job data was a mixed bag.
- Employers added 216,000 jobs, which was above expectations. However, previous months’ jobs gains were revised down 71,000.
- Wages rose strongly: 0.4% from November and 4.1% annually compared to December 2022.
But the labor force contracted 676,000 workers last month. There are only 0.71 workers available for every open job.
Why it matters: Usually when the economy adds jobs at a strong pace, workers come back to the labor force. The drop in the labor force could be an aberration, or it could signal that the jobs market is weakening.
What to Expect from the Economy in 2024
December 21, 2023
The economy faces many challenges in 2024, with the worker shortage being the key one.
Why it matters: The economy could slow in the first half of 2024 because consumer spending is likely to slow. Meanwhile, job openings are going to remain far above the number of unemployed workers. The economy is poised to grow once inflation falls further and Americans absorb the effects of higher interest rates.
Be smart:
- Consumer spending: Consumers’ pandemic-era savings are largely gone, and credit card balances have risen sharply. This will weaken spending and growth. However the worker shortage will put a floor under how much the economy slows because wages have been growing and are likely to continue.
- Inflation and interest rates: While inflation is coming down, it remains above the Federal Reserve’s 2% target. This will remain a burden on consumers’ budgets and reduce the chances the Fed can lower interest rates soon.
Bottom line: Leaders in government should be aware of the challenges businesses, families, and communities will face in 2024. Pro-growth policies should be top of mind for keeping the U.S. economy strong and Americans thriving.
Read more:
Inflation Dips but Remains Above Fed Target
December 13, 2023
The Consumer Price Index (CPI), the broadest measure of consumer prices, rose 3.1% annually in November and declined from 3.2% in October.
Why it matters: Inflation is down from the peak of 8.8% in June 2022, but still well above the Federal Reserve’s 2% target rate.
Be smart: Core prices, which strips out volatile elements like food and energy, rose 4.0% on an annual basis and 0.3% from October to November. This is a metric the Fed looks at closely, and it is still high.
- Housing, medical care, and motor vehicle insurance saw the largest monthly increases.
- Prices for apparel, household furnishings and operations, communication, and recreation decreased over the month.
Bottom line: The data likely means the Fed will hold off on interest rate hikes at least until early 2024.
Job Openings Decline But Labor Market Remains Tight
December 8, 2023
The labor market remains tight. There were 8.7 million job openings at the end of October, down 617,000 from September.
Why it matters: There are 2.2 million more job openings than unemployed workers.
Details: Hiring and quits remained at the same levels as in September. Businesses continue adding workers, and workers remain confident they can quit their jobs and find other ones easily.
Big picture: A smaller workforce is our new reality. Finding enough workers will be a challenge for businesses around the country and across sectors.
- The Chamber’s America Works Initiative assists employers in filling open jobs by helping Americans get in-demand skills, supporting government reforms so more people enter the workforce, and advocating for legal immigration reform and a secure border.
Learn more:
How U.S. Manufacturers Can Get a Boost
December 7, 2023
Manufacturing orders were down in October (the latest available data and seasonally adjusted) by almost 4%, but this was mainly due to the auto workers strikes that disrupted the industry. After excluding automotive and volatile aircraft sales, orders were down by a little over 1%.
Big picture: The manufacturing sector got a boost from the pandemic as people bought goods instead of spending on services. The decline since then is a return to the mean.
Looking ahead: High interest rates may affect the demand for higher-priced items, but if the administration would pursue a bold trade agenda to open more markets for American goods that could boost manufacturers’ confidence and competitiveness.
High Demand, Low Supply Keep Home Prices Up
December 1, 2023
Home prices are rising again, up 4% on an annual basis in September (the most recent available data). That marks the third straight month of gains.
Be smart: Housing prices remain high because demand outpaces supply. So even with higher interest rates, buyers are still buying because they have few options.
Why it matters: Affordable housing will remain a major issue as long as supply fails to meet demand. We must build more houses and make it easier to renovate existing stock, but too often, obstacles like permitting and zoning laws get in the way.
