The US economy grew faster than previously estimated in the fourth quarter, lifted by strong consumer spending and business investment in non-residential structures like factories.

Gross domestic product increased at a 3.4 per cent annualised rate last quarter, revised up from the previously reported 3.2 per cent pace, the Commerce Department’s Bureau of Economic Analysis said in its third estimate of fourth-quarter GDP.

The revision reflected upgrades in consumer spending, non-residential fixed investment, and state and local government spending.

Economists polled by Reuters had expected GDP growth would be unrevised. The economy is growing above what Federal Reserve officials regard as the non-inflationary growth rate of 1.8 per cent and continues to outperform its global peers despite 525 basis points worth of interest rate hikes from the US central bank since March 2022 to quell inflation.

When measured from the income side, the economy expanded at a robust 4.8 per cent rate. Gross domestic income (GDI) increased at a 1.9 per cent pace in the July-September quarter. In principle, GDP and GDI should be equal, but in practice differ as they are estimated using different and largely independent source data.

A widening gap between GDI and GDP in prior quarters had raised concerns among some economists that the economy was not as strong as suggested by the GDP figures. The surge in GDI reflected higher wages.

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The economy is being underpinned by a resilient labour market, which is keeping wage growth elevated and driving consumer spending. Growth estimates for the first quarter are converging around a 2.0 per cent pace.

A separate report from the Labor Department on Thursday (Mar 28) showed initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 210,000 for the week ended March 23. Economists had forecast 212,000 claims in the latest week.

Claims have been hovering in a 200,000-213,000 range since February. Most employers are retaining their workers despite a rash of high-profile layoffs at the start of the year.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 24,000 to 1.819 million during the week ending March 16, the claims report showed. REUTERS