US economy grew 2.3% in fourth quarter, Commerce Department says

The U.S. economy grew at a rate of 2.3% in the fourth quarter, in line with the prior reading and economists’ expectations.

The Commerce Department’s Bureau of Economic Analysis (BEA) on Thursday released its first revision of the estimate for fourth quarter gross domestic product (GDP), which found the U.S. economy grew at an annual rate of 2.3% in the fourth quarter, which runs from October through December.

Economists surveyed by LSEG had expected the economy to grow at a 2.3% rate in the quarter. The BEA’s preliminary estimate of GDP in the quarter that was released last month also came in at 2.3%, though economists expected 2.6% growth at the time.

GDP growth slowed in the fourth quarter when compared with the third quarter, which had 3.1% growth. The BEA noted the deceleration in the fourth quarter was primarily due to downturns in investment and exports that were partially offset by an acceleration in consumer spending, while imports declined.

CONSUMER CONFIDENCE SLUMPS IN FEBRUARY WITH BIGGEST MONTHLY DROP IN NEARLY 4 YEARS

Consumer spending grew 4.2% in the fourth quarter, with increases in both services and goods. It was up from 3.7% in the third quarter and 2.8% in the second quarter. 

Government spending grew at a faster pace than initially estimated – it was up 2.9% in the fourth quarter, a larger increase than the initial 2.5% estimate, though it was slower than the 5.1% increase in the third quarter.

US PRODUCER PRICES RISE SLIGHTLY ABOVE EXPECTATIONS IN JANUARY

Business investment declined 5.7% in the fourth quarter, a deeper drop than the initial estimate of 5.6%. It had been relatively flat in the third quarter, when it grew 0.8%. Last quarter, investment in equipment decreased 9% while investment in structures dipped 3.2% – both steeper declines than in the initial estimate.

Disposable personal income increased 2.5% last quarter, slightly less than the initial estimate of 2.8%, though it was a larger gain than the prior two quarters.

AMERICA’S WEALTHIEST HOUSEHOLDS DRIVING NEARLY HALF OF CONSUMER SPENDING: MOODY’S

Personal savings as a share of disposable income came in at 3.8% in the fourth quarter, continuing a gradual decline that spanned 2024 after a 5.4% reading in the first quarter.

“Revisions to Q4 GDP appear uneventful, but the downward revision to real business equipment spending offers a warning that policy uncertainty could be a bigger issue in H1 than we anticipated,” said Ryan Sweet, chief U.S. economist at Oxford Economics. 

“Business equipment spending is among the most sensitive components of GDP to changes in policy uncertainty, and there hasn’t been a post-election reprieve in uncertainty, particularly for trade,” Sweet added.