The second reading of the US GDP for the fourth quarter of 2024 shows growth of 2.3%, matching expectations. The growth rate for Q3 was recorded at 2.8%.

Final sales increased by 3.2%, while consumer spending also rose by 4.2%. Inflation rates were above expectations, with the GDP deflator at 2.4% and core PCE at 2.7%.

In terms of contribution, consumption added 2.79%, government contributed 0.49%, and net international trade accounted for 0.12%. Inventories, however, decreased by 0.81%. The revised data indicates rising inflation, particularly in PCE services excluding energy and housing.

The revised figures paint a clear picture of steady economic expansion, albeit at a slightly reduced pace compared to the previous quarter. A 2.3% growth rate aligns with earlier projections, reinforcing confidence that the economy remains on a stable path. The modest slowdown from 2.8% in Q3 reflects a natural adjustment rather than a sharp downturn.

Consumer spending remains strong, showing an increase of 4.2%, suggesting that households continue to support growth despite persistent price pressures. The 3.2% rise in final sales confirms that demand remains intact. However, inflation readings surpassing estimates add to concerns about price stability. A GDP deflator of 2.4% and core PCE at 2.7% signal price increases beyond initial forecasts, highlighting that inflationary forces are more persistent than some had anticipated.

Delving deeper, consumption provided the largest boost to growth, contributing 2.79%. Government spending added 0.49%, showing a steady hand from public expenditures. Net international trade’s 0.12% contribution reflects a stabilising global trade position. Conversely, inventories declined by 0.81%, indicating that businesses are drawing down stockpiles, potentially in response to uncertain demand or shifts in supply chain expectations.

Higher inflation within PCE services, excluding energy and housing, suggests that price pressures remain concentrated in core spending areas. Elevated costs in these sectors carry implications for monetary policy, as persistently strong underlying inflation may warrant a reassessment of policy direction.

Given these dynamics, market participants must weigh the balance between sustained growth and inflation concerns. Policymakers will be monitoring whether current conditions justify adjustments to interest rates. The next few weeks will provide further clarity on how shifting inflation trends affect expectations. As new data emerges, it will be essential to reassess positions, taking into account both inflation’s effect on purchasing power and the broader trajectory of economic performance.