The US economy expanded at an annualized rate of 2.3% in Q4 2024, marking the slowest growth in three quarters and down from 3.1% in Q3, though in line with the advance estimate. The deceleration reflected mixed trends across different sectors, with strong consumer spending offset by weaker business investment and trade uncertainties.
US GDP growth rate unrevised at 2.3%
Personal consumption remained the main driver of growth, increasing by 4.2%, the fastest pace since Q1 2023, as households continued to spend despite elevated inflation and higher interest rates. Spending rose across both goods (6.1%) and services (3.3%), supported by resilient wage growth and a still-solid labor market. Meanwhile, government expenditure expanded more than initially estimated (2.9% vs. 2.5%), bolstered by higher federal and state spending.
Trade data show slightly better-than-expected trends
Trade data showed slightly better-than-expected trends, with exports declining less than previously reported (-0.5% vs. -0.8%) and imports falling more sharply (-1.2% vs. -0.8%), resulting in a positive net trade contribution of 0.12 percentage points to overall growth. However, private inventories continued to be a drag, reducing GDP growth by 0.81 percentage points—though this was a smaller hit than the 0.93 percentage point impact initially estimated.
On the downside, fixed investment contracted more than previously thought (-1.4% vs. -0.6%), largely due to a deeper decline in equipment investment (-9% vs. -7.8%) and stagnation in intellectual property investment (0% vs. 2.6%). Despite these weaknesses, residential investment remained a bright spot, rising slightly more than expected (5.4% vs. 5.3%), reflecting ongoing demand in the housing market.
For the full year 2024, the economy grew by 2.8%, showcasing resilience despite monetary policy tightening and global economic uncertainties.
