Gross Domestic Product (GDP) quantifies total value of all goods and services produced within a nation’s borders. Therefore, it serves as a measure of economic activity. GDP can be computed using three approaches: production, income, and expenditure. Importantly, real GDP adjusts for inflation, providing a true growth picture. Governments, businesses, and economists utilize GDP to understand trends. Hence, it aids in making informed decisions.
GDP 2nd Estimate Q4 2024
The U.S. Bureau of Economic Analysis released the second estimate for the Gross Domestic Product (GDP) for the fourth quarter of 2024, showing an annual growth rate of 2.3% for the period from October to December. This marks a slowdown from the 3.1 percent growth observed in the third quarter of 2024.
The increase in real GDP during the fourth quarter was mainly driven by higher consumer and government spending. However, this was partly offset by a decrease in investment. Notably, imports, which negatively impact GDP calculation, decreased.
The real GDP figure was revised upwards by less than 0.1 percentage points from the initial estimate released last month. This revision primarily reflects higher government spending and exports, balanced by downward revisions to consumer spending and investment.
Source: U.S. Bureau of Economic Analysis
Contributing Factors to Q4 GDP Changes
Compared to the previous quarter, the slower growth in Q4 was mainly due to:
- Downturns in investment and exports.
- Accelerated consumer spending.
- A decrease in imports.
Inflation and Price Indices
- Price Index for Gross Domestic Purchases: Increased by 2.3% in Q4, revised up by 0.1 percentage points from the prior estimate.
- Personal Consumption Expenditures (PCE) Price Index: Increased by 2.4%, revised up by 0.1 percentage points.
- PCE Price Index Excluding Food and Energy: Increased by 2.7%, revised up by 0.2 percentage points.
Annual GDP for 2024
Real GDP increased by 2.8% from the 2023 annual level to the 2024 annual level, consistent with prior estimates. This growth reflects increases in consumer spending, investment, government spending, and exports, while imports also rose.
- Price Index for Gross Domestic Purchases: Increased by 2.4% in 2024, revised up by 0.1 percentage points.
- PCE Price Index: Increased by 2.5%, in line with previous estimates.
- PCE Price Index Excluding Food and Energy: Increased by 2.8%, also in line with previous estimates.
Impacts of Report on the Stock Market
The recent GDP report for the fourth quarter of 2024 showed a 2.3% increase, indicating steady economic growth but slower than the 3.1% growth in the previous quarter. This growth was driven by consumer and government spending, despite a decline in investment. This report signals a mixed but generally positive outlook for the stock market.
SPY has reached a cluster of dynamic support (long-term uptrend line) and static support at $590.
Additionally, the overall market performance is weak due to decreasing momentum. If the index breaks the static and dynamic resistance, a further decline is anticipated. For the price to surge, the index needs strong momentum (RSI downtrend line break).
