The US economy grew at a slower-than-expected pace in the fourth quarter.
The Bureau of Economic Analysis’s advance estimate of fourth quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 2.3% during the period, below the 2.6% growth expected by economists surveyed by Bloomberg. The reading came in lower than the 3.1% growth seen in the third quarter.
Increases in consumer spending and government spending drove economic growth in the quarter while decreases in investment offset some gains. For the year, the US economy grew at 2.8% pace, slightly below the 2.9% number seen in 2023 but above the 2.5% growth seen in 2022.
“The U.S. consumer continued to power overall economic growth as employment and wage gains remain firm and massive wealth effects from sharp increases in equity and home values turbo charge spending especially among upper-income households,” Nationwide chief economist Kathy Bostjancic wrote of this morning’s Q4 GDP report. “Holding back growth was a decline in business investment, flat reading in net exports, and sharp decline in inventories.…The drawdown in inventories, especially at the wholesale level indicates that retailers also scurried to stock up before possible tariffs. This could continue into early 2025.”
Meanwhile, the “core” Personal Consumption Expenditures index, which excludes the volatile food and energy categories, grew by 2.5% in the fourth quarter, in line with estimates and above the 2.2% seen in the prior quarter.
The data’s release comes as investors try to gauge if the Federal Reserve will start cutting interest rates again in 2025 after holding them steady on Wednesday. Powell said in a press conference that the economy “remains strong” while inflation “remains somewhat elevated.”
“We don’t need to be in a hurry to adjust our policy stance,” Fed Chair Powell said.
Following Wednesday’s Fed meeting, markets see less than a 50% chance that the Fed cuts rates before its June meeting, per the CME FedWatch Tool.
Read more: Fed rate decision: How it affects your bank accounts, loans, credit cards, and investments
This is breaking news. More to come.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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