US GDP growth revised higher in the fourth quarter

The US economy expanded at an annualized rate of 2.4% in Q4 2024, slightly higher than the 2.3% previously estimated, primarily reflecting a downward revision to imports.

US GDP growth revised higher in the fourth quarter

The revised data showed that exports fell slightly less than initially reported (-0.2% vs. -0.5%), while imports declined more than originally anticipated (-1.9% vs. -1.2%), which led to a more favorable contribution from net trade. The positive contribution from net trade was revised upward to 0.26 percentage points (pp), compared to the initial estimate of 0.12 pp, offering a slight boost to overall GDP growth for the quarter. Government expenditure also grew more than initially projected, rising by 3.1% compared to 2.9% in the earlier estimate. This increase was driven by both defense and non-defense spending, reflecting ongoing government investments in various sectors. Meanwhile, fixed investment contracted less than initially expected, with a decline of -1.1% versus -1.4% in the previous estimate. However, investment in equipment still saw a notable drop of -8.7%, though slightly better than the -9% initially reported. Investment in intellectual property products also shrank more than expected, falling by -0.5% instead of the 0% growth initially anticipated.

Residential investments rise at a faster pace

On the housing front, residential investment rose at a faster pace than originally anticipated, increasing by 5.5% compared to the 5.4% reported in the previous estimate. This revision indicates continued resilience in the housing market, with strong demand for housing and construction despite rising interest rates. Personal consumption remained the main driver of economic growth, increasing by 4%, slightly less than the 4.2% in the previous estimate, but still the largest gain since Q1 2023. Consumer spending was broad-based, with both goods and services seeing gains. Spending on goods rose by 6.2%, slightly up from 6.1%, while services spending grew by 3%, down from 3.3% in the initial estimate. This shift suggests consumers remained active in both durable goods and services sectors, despite some inflationary pressures.

Private inventories contributed negatively to growth

Private inventories contributed negatively to growth, cutting 0.84 percentage points from the overall GDP, slightly more than the 0.81 percentage points in the earlier estimate. This suggests that businesses may have reduced stockpiles more than expected, reflecting cautious inventory management amid uncertain demand conditions. Overall, while the revisions offered a more optimistic view of certain sectors, challenges in investment and inventory levels may signal ongoing pressures in the broader economic landscape.