GDP

The U.S. economy grew at an annualized rate of 2.3% in the fourth quarter of 2024, according to preliminary data, marking a slowdown from the 3.1% expansion in the third quarter. For the full year, real GDP rose by 2.8%, a slight dip from the 2.9% growth recorded in 2023. Despite various economic headwinds, growth remained resilient, driven largely by strong consumer spending. Looking ahead, uncertainties cloud the 2025 outlook, but the current forecast projects a 2.4% expansion for the U.S. economy this year.

The underlying data for Q4 2024 painted a mixed picture. On the positive side, consumer spending remained a key driver, rising at an annualized rate of 4.2%. Services spending saw a solid 3.1% increase for the quarter, while personal consumption expenditures—covering both goods and services—contributed 2.82 percentage points to overall growth. Notably, the food services and accommodations sector added 0.12 percentage points to Q4 GDP, marking its second consecutive quarter of positive contribution to real GDP growth—a welcome development. 

In contrast, business investment showed weakness. Nonresidential fixed investment declined by 0.6% at an annualized rate in the fourth quarter, marking its first contraction in two years, driven by significant drops in spending on equipment and structures. Inventory spending also fell, marking its fourth decline in the past five quarters. On a more positive note, residential investment rebounded, rising 5.3% after two consecutive quarters of decline. Overall, gross private domestic investment subtracted 1.03 percentage points from real GDP growth in Q4 2024, primarily due to reduced inventory investment. 

Government spending increased at a modest 2.5% annualized rate, adding 0.42 percentage points to GDP growth. Meanwhile, international trade had a muted impact on economic growth in the quarter, adding just 0.04 percentage points to headline growth. On the other hand, net exports was a drag on real GDP growth in five of the previous six quarters.