• US GDP growth for Q4 2024 revised upward to 2.4% annual rate, beating consensus estimates.
  • Consumer spending and government outlays drive expansion while private investment drags.
  • Full-year 2024 growth settles at 2.8%, marking a modest slowdown from 2023.

Steady but slowing expansion

The US economy closed out 2024 on slightly firmer footing than initially estimated, with fourth-quarter GDP growth revised up to a 2.4% annualized pace from 2.3% in prior readings. The Commerce Department's final estimate released Thursday edged past economist expectations for an unrevised 2.3% print.

The upward adjustment primarily reflected stronger consumer spending - particularly on services - and increased government expenditures at both federal and local levels. These gains were partially offset by weaker private investment, with businesses pulling back on equipment purchases amid elevated borrowing costs.

"The consumer continues to shoulder the weight of this expansion," said one economist who asked not to be named discussing preliminary data. "But we're seeing clear signs that higher rates are starting to bite in the capex space."

Inflation persists as growth moderates

Price measures in the report showed ongoing inflationary pressures, with the GDP price index rising 1.7% and the core PCE index - the Fed's preferred inflation gauge - climbing 2.1% for the quarter. The full-year 2024 expansion of 2.8% represents a modest deceleration from 2023's 2.9% pace.

Looking ahead, most economists anticipate further cooling in 2025, with growth projections clustering between 1.7-2.1%. The combination of fading pandemic-era fiscal support, the lagged impact of monetary tightening, and potential trade policy shifts are expected to weigh on activity.

Federal Reserve officials have signaled they're in no rush to cut rates given the economy's resilience, though traders still price in one or two reductions by year-end. The central bank's next policy meeting concludes May 1, with markets assigning low odds to any immediate action.

Correction: An earlier version misstated the core PCE figure. It has been updated to reflect the correct 2.1% reading.