Here’s What Economists Thought About Thursday’s GDP Growth

The economy’s robust growth surprised economists today, coming in far higher than anyone expected.

The inflation-adjusted gross domestic product (GDP), a measure of U.S. economic growth, slowed to an annual rate of 3.3% in the fourth quarter, down from a 4.9% rate in the third, the Bureau of Economic Analysis said Thursday.

A survey of economists by Dow Jones Newswires and the Wall Street Journal showed expected GDP to grow at a 2% annualized rate in the fourth quarter. Meanwhile, some individual forecasts were as low as 1.5% like in the case of BMO Economics.

Here’s what economists said in reaction to GDP’s unexpected growth.

“Not only did consumers spend and businesses invest more, as anticipated, but unexpectedly trade and inventories added to growth. But despite the robust growth, inflation was tame. …Strong growth and low inflation. Feels very good.” – Mark Zandi, chief economist at Moody’s Analytics

“In our view, the Fed has still not confirmed a consensus on timing of the first cut, but the momentum in growth gives the Fed latitude to hold rates higher for longer. The critical data are in hand for the January FOMC meeting where we expect the debate to continue while policymakers wait for important annual revisions to employment and inflation data in early February.” – Ellen Zentner, Chief US Economist and the Morgan Stanley economics team

“The favorable news on inflation gives the FOMC leeway to begin an easing cycle in coming months. We look for the Committee to cut rates by 25 bps at its May 1 meeting, although today’s inflation data will keep market hopes for a rate cut at the March 20 meeting alive.” – Jay Bryson, Wells Fargo Chief Economist