US growth in the last quarter of 2024 slowed down more than expected, with the BEA reporting that Real gross domestic product increased at an annual rate of 2.3% in the fourth quarter of 2024, below the 2.6% estimate and down from 3.1% in Q3. This left the 2024 Q4/Q4 growth rate at 2.5%, as step down from the 3.2% rate seen in 2023.
Compositionally, the headline was held back by volatile components with inventories dragging 0.9pp off overall growth. Consumer spending was extremely, almost unbelievably, strong again up 4.2% (saar) in the quarter but business fixed investment was weaker down 2.2%(saar).Here is the full breakdown:
And visually:
What is notable about the GDP print is that while virtually every other aspect of the US economy shrank, with the exception of government but that is about to hit a sharp U-turn under Trump/DOGE – it was all about consumer spending, which not only comprises about 70% of US GDP growth on average, but which advanced at a 4.2% pace — the first time since late 2021 that outlays have exceeded 3% in consecutive quarters. The acceleration was led by a pickup in motor vehicle sales, something one wouldn’t know by looking at the stock price of various car makers.As shown in the chart below, the 4.2% personal consumption print was the biggest beat to consensus expectations (of 3.2%) on record!
Elsewhere, nonresidential fixed investment declined an annualized 2.2%, the first decline in more than three years. Business spending on equipment decreased an annualized 7.8%, reflecting the impact of a machine workers’ strike at aircraft maker Boeing. Outlays for structures declined for a second straight quarter.Government spending rose an annualized 2.5% following a strong third- quarter advance that was led by defense expenditures. Growth in federal spending is at risk as President Donald Trump’s agenda takes aim at programs he’s pledged to eliminate.Other parts of the economy’s fourth-quarter report card didn’t score as well. Inventories were the largest drag, subtracting nearly a full percentage point from growth — the most since early 2023.The outlook for the economy this year is one of more moderate growth. The latest Bloomberg month survey shows GDP growth will cool to 2.2% on average, with economists anticipating only a few Fed interest-rate cuts. At the same time, the roll-out of Trump policies add an element of uncertainty.At the same time, released alongside today’s GDP, headline PCE prices rose 2.3% (saar) over the fourth quarter, relative to 1.5% in Q3. The core PCE price index was up 2.5% (saar) in Q4, marking only the second quarterly acceleration since late 2022. The monthly December release of personal income and spending including PCE prices will be released tomorrow.Bottom line: the US economy is now all about credit at either the individual level or the federal level – that’s the only place growth can be found.The GDP figures capped another solid year for the world’s largest economy driven entirely by record debt, which helped defy expectations for a marked slowdown as consumers hung tough in the face of persistent inflation and high borrowing costs. That helps explain why the Federal Reserve is taking a more measured approach to future interest-rate cuts.US stock index futures remained higher while Treasuries pared gains and the dollar was little changed.More By This Author:Inflation Storm Leaves Americans More Reliant On Food BanksTesla Spikes Despite Soft Q4 Results After Forecasting Vehicle Business Returning To GrowthMSFT Tumbles On Cloud Revenue Miss
