The U.S. economy’s growth experienced a slight downward adjustment for the fourth quarter of 2023, still showcasing a healthy growth rate but at a marginally slower pace than initially estimated, according to the second estimate released Wednesday.

Mortgage rates remain relatively stable, staying above 7% for the week ending Feb. 23, with a continued decline in applications for the third consecutive week.

Wednesday’s Economic Updates: Key Takeaways

The U.S. Gross Domestic Product (GDP) expanded at an annualized rate of 3.2% quarter-over-quarter in the final quarter of 2023, decelerating from the vigorous 4.9% growth observed in the third quarter. This pace represents a moderation from earlier projections.

The GDP price index increased at a 1.7% annualized rate, a slowdown from 3.3% in the preceding quarter and slightly higher than the initial estimates of 1.5%.

Real consumer spending, a significant catalyst for the quarter’s growth, grew at a rate of 3%, above previous estimates of 2.8%.

The Personal Consumption Expenditures (PCE) price index saw an increase of 1.8%, marking an upward revision of 0.1 percentage points from previous figures. When excluding food and energy prices, the core PCE price index rose by 2.1%, also adjusted upward by 0.1 percentage point.

In the fourth quarter, the nominal GDP rose by 4.9% on an annual basis, or by $334.5 billion, reaching a level of $27.94 trillion. This represents an upward revision of $5.8 billion from the prior estimate.

The 30-year fixed mortgage rate slightly decreased from 7.06% to 7.04% for the week ending Feb. 23, interrupting a streak of four consecutive weeks of increases.

Mike Frantoni, economist at the Mortgage Bankers Association of America, noted that higher rates have hindered activity. Mortgage applications fell by 5.6%, marking a continued decline for the third week in a row and furthering the significant 10.6% drop from the previous period to a low not seen since November 2023.

Market Reactions

Before the update on fourth-quarter GDP growth, traders had estimated a 61% probability of a Federal Reserve interest rate cut by June, with this likelihood increasing to 82% for a cut by July.

Additionally, markets anticipate approximately 84 basis points of cumulative reductions in interest rates by December 2024, suggesting an expectation of slightly more than three rate cuts of 25 basis points each.

Following the release, the U.S. dollar index (DXY), as monitored by the Invesco DB USD Index Bullish Fund ETF , maintained its gains for the session, up 0.3%.

Futures on both the S&P 500 and Nasdaq 100 were 0.3% lower in Wednesday’s premarket trading.

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