The U.S. economy grew by a bustling 3.1% in 2023, shaking off recession fears and offering an upbeat picture of consumers and businesses ahead of a pivotal election year.

Growth slowed slightly in the last three months of 2023 – to an annual rate of 3.3%, down from a sweltering 4.9% in the previous quarter, the Bureau of Economic Analysis said Thursday. The latest figures show the economy has returned to stable footing following a period of dramatic pandemic-fueled swings that marked 2020 through early 2022.

“The doom and gloom the prevailed last year has been swept aside,” said Philipp Carlsson-Szlezak, global chief economist at Boston Consulting Group. “The pessimism has been punted out, quarter after quarter.”

The economy’s resilience has been driven by vigorous consumer spending. A strong job market and rising wages have made it possible for many households to keep shelling out – particularly on services such as entertainment, travel and dining out – even at a time of elevated inflation.

That spending by everyday Americans accounted for most of the economy’s growth in the fourth quarter. Increased government spending, at the state, local and federal level, as well as higher exports and more private and residential investments also lifted the latest GDP reading, which sums up the goods and service produced in the U.S. economy. Meanwhile, a rise in imports dragged down the latest reading.

“This is generally what a healthy U.S. economy should look like growth driven by consumer spending,” said Lauren Goodwin, an economist and chief market strategist at New York Life Investments. “The consumer has been incredibly resilient and has certainly been stronger than we expected.”

Bookings at Flowertown Bed and Breakfast in Summerville, S.C., are up across the board: More guests are staying overnight, and demand for weddings, baby showers, and other events is higher than it has been in years.

“I’ve been surprised at just how steady things have been,” owner Carol Grant said. “I’m at the grocery store every other day and the prices are just atrocious, but people are still spending. There hasn’t been any kind of slowing.”

Strong economic growth has distinguished the United States from its peers. Europe and Britain are on the verge of recession, and China – the world’s second-largest economy – is on slippery footing. Overall, economic growth in advanced economies is expected to slow this year, to 1.4%, according to the International Monetary Fund.

Government policy played an important role in supporting the economy last year. The Biden administration’s efforts to fund new infrastructure and clean energy projects have created new jobs and spurred $640 billion in private investments around the country.

Despite the economy’s strong rebound from the pandemic-inflicted recession, Biden has struggled to convince voters that his policies are making their lives better. Higher prices, particularly on essentials like food, housing, and utilities, have clouded Americans’ views on the economy, with inflation routinely topping the list of voters’ biggest concerns.

The economy is widely expected to continue slowing in 2024, after two years of torrid post-pandemic expansion. (GDP grew by 5.95% in 2021 and 2.06% in 2022.) Although some economists still expect a mild recession this year, many appear optimistic that the economy can stabilize without major job losses or a protracted downturn.

“We are coming down to more sustainable levels, both in the economy and in the job market,” said Satyam Panday, chief U.S. economist at S&P Global Ratings. “We expect a controlled, steady slowdown, not a recession.”

The Federal Reserve has aggressively raised interest rates since last year in a bid to slow the economy enough to bring down inflation. Although its efforts are working – prices are up 3.4% from a year ago, down from a peak of 9.1% in June 2022 – many Americans are still reeling from sticker shock at the grocery stores and gas prices, where costs remain elevated from pre-pandemic levels.

Still, there are signs that Americans are slowly starting to feel better about the economy as inflation eases. Consumer confidence level picked up in November and December. It is unclear, though, whether that will translate to political points for the White House.

Anthony Reilly, who owns a barber shop in Philadelphia, says business has gradually slowed in recent months as clients rethink their spending. The usual holiday boom, which begins just before Thanksgiving, wasn’t quite as dramatic this time around. January, too, is shaping up to be slower than usual.

“It feels like things are a little more up in the air like everyone is starting to tighten their purse strings,” he said. “It’s not scary-dead, but also not crazy busy like it used to be.”

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