The United States economy expanded more rapidly than anticipated in the last quarter of 2023, avoiding a recession that many analysts had predicted, according to a report from the Commerce Department on Thursday.

The Gross Domestic Product (GDP), representing the total goods and services produced, rose at an annualised rate of 3.3% in the fourth quarter of 2023, following seasonal and inflation adjustments.

This growth outpaced the consensus estimate of a 2% increase from Wall Street for the quarter. The third quarter had seen a 4.9% growth rate.

For the entire year of 2023, the U.S. economy grew at a 2.5% annualised rate, surpassing early-year predictions from Wall Street, which anticipated minimal growth.

Consumer spending remained a key driver of this growth throughout the year. Personal consumption expenditures saw a 2.8% rise in the quarter, marginally lower than the previous period.

Increases in state and local government spending, which rose 3.7%, and a 2.5% rise in federal government expenditures also contributed to the economic growth. Additionally, gross private domestic investment went up by 2.1%, marking another important factor in the quarter’s strong performance.

Regarding inflation, the personal consumption expenditures price index increased by 2.7% annually, a decrease from the 5.9% rate a year earlier. The core index, excluding food and energy, climbed 3.2% annually, compared to 5.1%.

However, inflation rates were considerably lower on a quarterly basis. Core prices, the Federal Reserve’s preferred measure for long-term inflation, rose by 2% during the quarter, while the headline rate was 1.7%.

The market response to the report was relatively subdued. Stock futures saw a slight increase, while Treasury yields declined.