GDP Growth to End 2024 at 2.3%, Slower Than Expected
The pace of the U.S. economic expansion slowed in the fourth quarter, according to the latest estimate released Thursday.
Inflation-adjusted gross domestic product grew at an annualized rate of 2.3% in the three months through December, according to the first estimate by the Bureau of Economic Analysis.
The consensus among economists surveyed by FactSet is for growth of 2.4% in the fourth quarter, compared with a 3.1% pace in the third quarter.
Looking at the full year, real GDP will grow at an annualized rate of 2.8% in 2024, compared with a 2.9% increase in 2023, the bureau reported Thursday.
Although momentum slowed late in the year and lagged slightly behind 2023 levels, the U.S. economy is still healthy and generating growth above 2% -- a typical level for advanced economies. In fact, Federal Reserve Chairman Jerome Powell lamented this during his Wednesday press conference to show that policymakers are pleased with the economy’s growth momentum.
“Recent indicators suggest that economic activity continues to expand at a solid pace. For 2024, overall, GDP appears to have risen above 2% -- supported by resilient consumer spending. Investment in equipment and intangible assets appears to have slowed in the fourth quarter, but remains strong for the year as a whole,” Powell said.
Strong consumer spending again drove much of the economic momentum recorded in the fourth quarter. Personal consumption expenditures rose 4.2% over the past three months, surpassing the 3.7% pace set in the third quarter.
However, declines in investment and net exports created more of a drag than in the previous quarter. Gross private domestic investment fell outright by 5.6%, a significant reversal from the 0.8% increase recorded in the third quarter.
Exports also fell 0.8%, a big drop from the 9.6% increase recorded in the quarter ended September. The goods trade deficit widened more than expected in December, rising to $122.1 billion from $103.5 billion in November, the Census reported Wednesday. Last month’s wider-than-expected trade gap is expected to drag on net exports — a key component in calculating GDP change.
If that level holds in the final trade balance report, it would be the largest goods trade deficit in history, wrote Goldman Sachs’ Jan Hatzius. The increase likely reflects U.S. companies anticipating potential tariff increases. The Census data also showed that wholesale inventories fell more than expected, as did fourth-quarter growth in real gross private domestic investment.
Thursday’s release also includes the quarterly estimate of the Federal Reserve’s inflation gauge. The personal consumption expenditures price index rose 2.3% in the fourth quarter, compared with a 1.5% increase in the previous quarter. The core PCE price index, which excludes food and energy prices and is considered a better gauge of inflation trends, rose 2.5% in the final three months of 2024. That was slightly higher than the 2.2% increase in the third quarter. The monthly PCE price index data for December is due out Friday at 8:30 a.m. Eastern Time.
Source: Bloomberg
