4th Quarter GDP Beats Market Estimates; Consumers, Government Drive Growth

Financial markets dismissed fourth-quarter numbers and look toward first-quarter data.

People shop at a grocery store in New York City on March 12, 2025. Samira Bouaou/The Epoch Times

New government data show that the U.S. economy slowed in the fourth quarter but still finished 2024 on a solid footing.

According to the Bureau of Economic Analysis’s third estimate for the fourth quarter of last year, the gross domestic product (GDP) growth rate was 2.4 percent, down from the previous quarter’s 3.1 percent.

The consensus forecast indicated a 2.3 percent reading for the October–December period. The last estimate was also revised 0.1 percent higher for the final three months of 2024.

The last quarter’s expansion was fueled mainly by increases in consumer spending and government expenditures, which partly offset a decline in investment.

Consumer spending surged by 4 percent, reflecting a 6.2 percent jump in goods and a 3 percent gain in services.

Government consumption climbed by 3.1 percent. Federal outlays rose by 4 percent, and state and local expenditures increased by 2.5 percent.

Commerce Secretary Howard Lutnick has suggested that government spending might no longer be included in future GDP reports.

“You know that governments historically have messed with GDP,” Lutnick said in an interview with Fox News’s “Sunday Morning Futures” on March 9. “They count government spending as part of GDP. So I’m going to separate those two and make it transparent.”

Exports slipped by 0.2 percent, and imports dropped by 1.9 percent.

On the price front, inflationary pressures were elevated in the fourth quarter.

The GDP price index—a gauge of changes in prices of goods and services produced in the country—advanced by 2.3 percent, up from 1.9 percent in the third quarter. However, this was below the market estimate of 2.4 percent.

Personal consumption expenditure (PCE) prices rose by 2.4 percent, up from 1.5 percent. Core PCE, which omits the volatile energy and food categories, grew at a slightly lower-than-expected pace of 2.6 percent.

Little Reaction on Wall Street

The fourth-quarter GDP report offered little excitement in the U.S. stock market on March 27.

Following the economic data’s release, leading benchmark averages were flat in pre-market trading, struggling to rebound after President Donald Trump announced 25 percent tariffs on foreign automobiles on March 26.

U.S. Treasury yields were mixed, with long-term bonds driving the gains. The benchmark 10-year yield firmed above 4.36 percent.

Investors shrugged off the data as backward-looking and providing little insight into the current economic landscape.

Many developments have occurred since the end of the fourth quarter, particularly on the trade front.

Looking Forward to Q1

Tumbling consumer sentiment, increasing inflation fears, and growing recession concerns have been ubiquitous over the past couple of months. Surveys indicate that businesses and consumers are worried that the new administration’s tariff plans will adversely impact economic conditions.

The widely monitored Federal Reserve Bank of Atlanta’s GDPNow Model estimate for the first quarter signals a contraction of about 2 percent. The downward revision to growth prospects contributed to growing consternation on Wall Street.

The New York Stock Exchange on Wall Street in New York City on March 5, 2025. Spencer Platt/Getty Images

However, regional central bank economists clarified that the negative estimate resulted from soaring gold imports.

“The alternative model forecast, which adjusts for imports and exports of gold as described here, is 0.2 percent,” the Atlanta Fed stated.

Still, market watchers increasingly fear that the years-long expansion will deteriorate in the coming months.

According to a new CNBC CFO Council survey, 60 percent of chief financial officers think that the economy will slip into a recession in the second half of the year.

The Conference Board’s latest Consumer Confidence Index showed that many Americans expect higher inflation and a recession this year. In March, consumers’ expectations for income, business, and labor market conditions declined to a 12-year low. Additionally, the share of people anticipating a recession in the next 12 months was flat, at a nine-month high.

However, many economists are skeptical that the United States should prepare for a downturn.

While the financial markets will remain erratic in the short term, the hard data signal that there will not be a recession, according to Charles Ashley, a portfolio manager at Catalyst Funds.

“We’re going to avoid a recession,” Ashley said in a note to The Epoch Times.

Mark Malek, chief investment officer at Siebert Financial, is not predicting a recession, but “there are definitely clouds on the horizon,” he said.

“We are far from out of those rough seas at the moment. Maybe pack a light rain jacket and a sweater for our weekend getaway. Come to think of it, maybe we should pack some light clothing in case the weather turns around, as it often does,” Malek said in a note to The Epoch Times.

The Federal Reserve is also not forecasting a recession.

According to the Federal Open Market Committee’s dot plot in the updated Summary of Economic Projections, the U.S. central bank is not expecting back-to-back quarters of negative GDP growth.

Employment Data

The U.S. labor market still signals that it remains resilient despite the Department of Government Efficiency’s related actions.

Initial jobless claims held steady at 224,000 for the week ending on March 22, slightly below the consensus projection of 225,000. The previous week’s reading was revised higher by 2,000, from 223,000 to 225,000.

This Department of Labor metric provides a weekly snapshot of the labor market’s health as it reports on the number of people filing for unemployment benefits for the first time in a reporting period.

Continuing jobless claims—a measure of the number of people who continue to receive unemployment benefits—fell to a lower-than-expected 1.85 million from a downwardly adjusted 1.88 million in the previous week.

The four-week moving average, which strips out week-to-week volatility, tumbled by 4,750 to 224,000.