US economy sends mixed signals as GDP grows but labor market weakens in Q4 2023
The US economy showed mixed signals in the fourth quarter of 2023. Growth remained strong, with GDP expanding by 4.3%, but signs of strain appeared in consumer spending and the labour market. Meanwhile, stock markets pushed higher despite renewed volatility and political uncertainty.
The quarter began with solid economic momentum. A preliminary estimate placed third-quarter GDP growth at a healthy 4.3%. Yet consumer spending, though still resilient, faced pressure among lower-income households.
Equity markets made gains, supported by strong corporate earnings and Federal Reserve rate cuts. The S&P 500 rose by 2.66%, while the Russell 2000 added 2.19%. The Fed reduced the federal funds rate twice during the period, easing borrowing costs.
Inflation continued to cool but stayed above the central bank's 2% target, landing at 2.7%. Labour market conditions weakened, with unemployment climbing to 4.6%—its highest level in four years. Confidence also took a hit from a US government shutdown, adding to economic unease.
Investors focused on well-managed companies with strong competitive positions. While specific stock market data for major AI firms like Microsoft, NVIDIA, and Google was unavailable for this period, later reports highlighted how AI-driven disruption later impacted software stocks, despite robust earnings from firms like ServiceNow and Salesforce.
The quarter ended with equities advancing, backed by corporate profits and lower interest rates. Yet challenges remained, including persistent inflation, a softer jobs market, and political instability. The mixed picture left investors balancing optimism with caution as 2023 drew to a close.
