US economy grows slower than expected in Q4

The US economy grew by 2.3 percent quarter on quarter in the fourth quarter, slightly less than the average prediction of 2.6%. The overall growth rate for 2024 was 2.8 percent, which was bit less than the 2.9 percent rate in 2023.

Consumer spending bucked forecasts of a decline, rising to 4.2 percent quarterly from 3.7 percent in the previous quarter. The increase was driven by goods spending, notably a 12% increase in durable goods expenditures. Spending on services increased by a solid 3.1%, up from 2.8% in the third quarter.

With a 5.6 percent quarterly decline, gross private domestic investment was a drag. Looking at the details, non-residential investment fell 2.2%, mostly due to a 7.8% drop in equipment spending following two strong quarters of expansion. While investment in intellectual property items increased by 2.6 percent, structures also saw a decline of 1.1 percent. However, following two quarters of recession, residential investment rebounded, increasing 5.3% on a quarterly basis.

Even while government expenditure slowed from the 5.1 percent pace in the preceding quarter, it still grew at a rate of 2.5 percent each quarter. Spending by state and municipal governments decreased from 2.9% to 2%.

The decline in foreign trade was 0.8 q/q for both imports and exports. In the end, net trade produced a negligible boost to GDP, resulting in a wash.

A robust 3.1 percent q/q increase in final domestic demand was a deceleration from the 3.7 percent growth in Q3. Weaker inventory investment slowed headline GDP growth, deducting 0.9 percentage points from the total previous quarter.

The Fed's favored inflation indicator, core PCE inflation, increased to 2.5 percent q/q , a little increase from the 2.2 percent rate in Q3.