The U.S. economy showed strong growth in the fourth quarter, driven by robust consumer spending and business investment in nonresidential structures like factories and healthcare facilities. The Commerce Department reported on Thursday that profits also saw a solid increase, particularly among nonfinancial corporations, which could lead to sustained job retention and economic expansion. Despite multiple interest rate hikes from the Federal Reserve to combat inflation, the economy continues to outperform global peers.

The latest report revised the annualized growth rate to 3.4 percent, up from the previously reported 3.2 percent, indicating a healthier economy than initially thought. Consumer spending upgrades, business investment, and state and local government spending contributed to the upward revision. Market analysts believe the U.S. economy is maintaining a stable trajectory, and expectations remain that the central bank will begin cutting rates by June.

Key sectors driving growth include consumer spending, which makes up a significant portion of economic activity, along with business investments in manufacturing and commercial structures. While inventory accumulation lagged, the outlook for this year is optimistic, with expectations of a gradual increase in inventory levels over the next few years.

Corporate profits also saw a notable uptick, with domestic nonfinancial firms and financial institutions both recording gains. Higher profits and steady wage growth have bolstered the income side of the economic ledger. The labor market appears to be finding a better balance between job demand and supply, which could help alleviate upward wage pressures in the near future.

The report also noted a drop in initial claims for state unemployment benefits, indicating a stable job market despite earlier concerns over high-profile layoffs. Continuing claims, a proxy for hiring, saw a slight increase, pointing towards a steady employment landscape. Overall, the economy appears to be on a positive trajectory, with growth in key sectors and stable labor market indicators.


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