Your Evening Briefing: US Economy Booms Along Path to Soft Landing

The US economy continued its seemingly unstoppable ascent out of the pandemic recession and its inflationary aftermath, further burying wrong calls of recession by posting fourth-quarter growth numbers that crushed forecasts. Cooling inflation has fueled consumer spending amid continued, near-record low unemployment and rising wages. The economy’s main growth engine—personal spending—rose at a 2.8% rate while business investment and housing also helped fuel the larger-than-expected advance. A closely watched measure of underlying inflation rose only 2% for a second straight quarter, in line with the Federal Reserve’s target and its plan for a soft landing. Meanwhile, Americans who have voiced negativity in the face of an economy that’s been firing on all thrusters may be finally coming around, as consumer sentiment begins to rise. Wall Street cheered. Here’s your markets wrap.

Meanwhile, the US has pulled further ahead of China as the world’s biggest economy, thanks in part to those big-spending American consumers. “It is a striking turn of fortunes,” said Eswar Prasad, who once led the International Monetary Fund’s China team and is now at Cornell University. “The strong performance of the US economy, in tandem with all the short-term and long-term headwinds the Chinese economy is facing, renders it a less obvious proposition that China’s GDP will someday overtake that of the US.”