Shoppers in the Soho neighborhood of New York on March 26, 2025. Photographer: Yuki Iwamura/Bloomberg.
The U.S. economy expanded at a faster pace in the fourth quarter of 2024 than previously estimated, amid a robust increase in corporate profits.
Gross domestic product (GDP) advanced at a 2.4 percent annualized rate in the October-to-December period, according to the third release of the figures from the Bureau of Economic Analysis (BEA). The Federal Reserve’s preferred inflation metric—the core personal consumption expenditures (PCE) price index, excluding food and energy—was revised downward to 2.6 percent.
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The new figures also indicate that after-tax profits rose 5.9 percent in the fourth quarter, the most in more than two years. Profits as a share of gross value added for non-financial corporations, a measure of aggregate profit margins, widened to 15.9 percent—remaining above levels that prevailed from the 1950s to the onset of the pandemic in 2020. That suggests U.S. companies may have room to absorb higher costs from tariffs this year without passing them along to consumers.
“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.”
Forecasters generally anticipate slower growth in 2025 as consumers and businesses 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. GDP may be set for an outright contraction in the first quarter, thanks to a surge in imports in the first two months of the year, which partly reflects efforts by businesses to stock up on supplies ahead of tariffs. A separate report Thursday showed the trade deficit narrowed only slightly in February from January’s record high.
The fourth-quarter numbers were boosted by upward revisions to net exports, government spending, and business investment. Growth in consumer spending—which accounts for two-thirds of GDP—was marked lower, to 4 percent.
| Metric (quarter-over-quarter, SAAR) | Latest | Prior estimate |
|---|---|---|
| GDP | +2.4% | +2.3% |
| GDI | +4.5% | N/A |
| Consumer spending | +4.0% | +4.2% |
| Residential investment | +5.5% | +5.4% |
| Non-residential investment | -3.0% | -3.2% |
The government’s other main gauge of economic activity—gross domestic income (GDI)—rose 4.5 percent, after a 1.4 percent increase in the third quarter of 2024. While GDP measures spending on goods and services, GDI measures income generated and costs incurred from producing that income. The average of the two growth measures last quarter was 3.5 percent, the most in a year.
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