US Economic Growth Falls Short Of Q4 Estimates, Consumer Spending Hits 7-Quarter High

The U.S. economy continued to grow in the final quarter of 2024, but at a slower-than-expected pace as a decline in investments offset strong consumer spending.

Gross domestic product grew at an annualized rate of 2.3% in the fourth quarter compared to the previous three months, according to preliminary official data released Thursday.

This outcome marks a deceleration from the 3.1% growth recorded earlier, missing economist forecasts of a 2.6% expansion, as tracked by TradingEconomics.

The backbone of growth remained strong real consumer spending, which increased at an annualized pace of 4.3% in the fourth quarter, accelerating from the previous quarter's 3.7% gain. This marks the strongest consumer spending expansion since the first quarter of 2023.

“The increase in real GDP in the fourth quarter primarily reflected increases in consumer spending and government spending that were partly offset by a decrease in investment,” the Bureau of Economic Analysis wrote in its report.

Personal Consumption Expenditures prices also picked up, rising from 1.5% to an annualized 2.3% in the fourth quarter. Excluding food and energy, core PCE prices increased at an annualized rate of 2.5%, up from the previous 2.2%, but in line with estimates.

Meanwhile, the Department of Labor reported on Thursday that weekly jobless claims fell to 207,000 for the week ending Jan. 25, below the previous week’s 223,000 and expectations of 220,000.

Continuing claims for the week ending Jan. 18 eased to 1.858 million, down from the previous 1.9 million and below forecasts of 1.89 million.

Market Reactions

Futures on major U.S. indices were mixed, with contracts on the S&P 500 rising 0.3% by 8:35 a.m. ET, while Nasdaq 100 futures were down 0.4%.

Major tech companies witnessed mixed performances following earnings reports. Shares of Microsoft Corp. MSFT were down 4.5% in the premarket, while Meta Platforms Inc. META and Tesla Inc. TSLA rose 1.9% and 4%, respectively.

On Wednesday, the S&P 500 index, replicated by the SPDR S&P 500 ETF Trust SPY, closed 0.5% lower in reaction to the Fed meeting and Chair Jerome Powell‘s remarks.

Treasury yields held steady, with the 10-year yield hovering at 4.50% and the two-year yield at 4.20%. The iShares 20+ Year Treasury Bond ETF TLT was up 0.6% during the premarket.

The U.S. dollar index (DXY), tracked by the Invesco DB USD Index Bullish Fund ETF UUP, remained flat.

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