— The U.S. economy grew more rapidly in the final quarter compared to initial estimates, largely due to strong growth in business earnings.
The gross domestic product increased at an annualized pace of 2.4% during the October-to-December quarter, as indicated in the third revision released by the Bureau of Economic Analysis on Thursday. The Federal Reserve’s favored measure of inflation – the Personal Consumption Expenditures Price Index without food and energy components – was adjusted downward to 2.6%.
The data indicated that post-tax earnings increased by 5.9% in the final quarter, marking the highest rise in over two years. The ratio of profits to gross value added for nonfinancial businesses expanded to 15.9%, staying above the levels observed from the 1950s until the start of the pandemic in 2020. This implies that U.S. firms might be able to handle greater expenses due to tariffs this year without having to increase prices for customers.
“The fourth quarter GDP data tell us the economy entered the year with momentum and profitability and can thus withstand a degree of policy uncertainty,” Wells Fargo economists Shannon Grein and Tim Quinlan wrote in a note following the release. “That said, the concern is increasingly centered on how will businesses act in the face of trade winds leading to tremendous uncertainty this year.”
Predictors typically expect gentler economic expansion in 2025 due to consumer and business behaviors.
grow wary
of President Donald Trump’s economic agenda. The administration’s aggressive trade policy prompted Fed officials last week to mark down their projections, and Wall Street giants including Goldman Sachs and Morgan Stanley have made similar changes.
The GDP might experience a direct reduction during the initial quarter due to a significant rise in imports throughout January and February. This uptick partially mirrors business strategies aimed at amassing resources before new tariffs take effect. Additionally, another report released Thursday highlighted the widening trade gap.
decreased marginally in February
from January’s record high.
The figures for the final quarter saw an increase due to adjustments upwards in net exports, governmental expenditure, and corporate investments. The growth rate in consumer spending—which makes up about sixty-six percent of the GDP—was revised downward to 4%.
Metric (QoQ, SAAR)LatestPrior est.
| GDP | +2.4% | +2.3% |
| GDI | +4.5% | N/A |
| Consumer spending | +4.0% | +4.2% |
| Residential investment | +5.5% | +5.4% |
| Nonresidential investment | -3.0% | -3.2% |
The government’s second key indicator of economic performance — gross domestic income (GDI) — climbed 4.5% following a 1.4% rise in the third quarter. Whereas GDP tracks expenditures for products and services, GDI reflects the revenue earned and expenses paid in their production. On average, these two growth indicators amounted to a 3.5% increase last quarter, marking the highest point over twelve months.
A new report released on Thursday indicated that first-time filings for jobless aid remained relatively stable at 224,000 for the previous week. The February PCE report, set to be published on Friday, will provide updated information regarding consumer expenditure and price changes.
–Assisted by Jarrell Dillard.
(Updated with an economist’s commentary in the fourth paragraph.)
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