According to a Commerce Department study released Thursday, U.S. economic growth slowed somewhat more than anticipated in the last three months of 2024.
The economy expanded at a 2.3% annualized inflation-adjusted pace in the fourth quarter, according to the gross domestic product, which is a measure of all the products and services generated throughout the expansive U.S. economy during that time. Following growth of 3.1% in the third quarter, economists polled by Dow Jones had predicted a 2.5% increase.
Despite very strong growth, the study ends 2024 on a fairly depressing note. GDP increased 2.8% for the entire year, up from 2.9% in 2023. Between Q4 2023 and Q4 2024, growth was 2.5%. The first of three estimates that the department’s Bureau of Economic Analysis will offer was released on Thursday.
Vice President of Investment Strategy at Glenmede Mike Reynolds commented, “Today’s GDP report confirms that the U.S. economic expansion continued apace into the end of 2024 on relatively firm footing.” The U.S. economy as a whole suffers along with consumers, and household spending had a very impressive Q4 performance.
Despite the persistent burden of high costs for everything from vehicles to homes to eggs at the grocery store, growth was mostly sustained by consumers who kept up their strong spending. Even while inflation has significantly decreased from its 40-year high in mid-2022, consumers are still affected, especially those with lower incomes.
As usual, consumer spending accounted for over two-thirds of total activity and increased at a strong rate of 4.2%. Additionally, government spending accelerated at a rate of 3.2%.
Trade had a negative impact on growth during that time, since imports, which are deducted from GDP, decreased by 0.8%. Exports fell by 0.8% as well. More than a full percentage point was taken off the topline figure as gross private domestic investment fell by 5.6%. Additionally, inventories eased by almost 1 percentage point.
In other economic news on Thursday, the Labor Department announced that initial jobless claims for the week ending January 25 were 207,000, a significant decrease of 16,000 from the previous period and significantly less than the 228,000 predicted. A week behind schedule, continuing claims also decreased, dropping 42,000 to 1.86 million.
The Federal Reserve has been able to adopt a patient position on monetary policy due to the U.S. economy’s resiliency and the relative slowdown in inflation. Officials have stated that substantial rate cuts are unlikely this year, despite the Fed lowering its main interest rate by a full percentage point in the final four months of 2024.
Chair Jerome Powell insisted that he is not in a rush to loosen, and central bankers at the just finished Fed meeting showed no signs of anticipating cuts anytime soon.
Concerns have been raised by Fed officials over whether the inflationary trends have paused. According to Thursday’s data, the so-called chain-weighted price index—which tracks prices and takes into consideration people switching from more expensive to less expensive items—rose 2.2% for the quarter, which was slightly less than the 2.3% projection but higher than the 1.9% growth in the third quarter.
The statistics did, however, also reveal that customers are using their savings to pay for their purchases. At 4.1%, the personal saving rate was at its lowest level in two years, down 0.2 percentage points from the previous quarter.
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