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 Final Estimate Q4 2024
The U.S. economy grew by 2.4% in the fourth quarter of 2024, slower than the 3.1% growth in the third quarter. The slower growth was mainly due to drops in investment and exports, although spending by consumers and the government helped offset some of the decline.
Source: U.S. Bureau of Economic Analysis
Industry Contributions
Goods-producing industries grew by 2.3%, services grew by 2.4%, and government activities increased by 2.7%.
Overall production (gross output) rose by 1.7%, with services and government driving most of the increase.
Price Changes
Prices for goods and services increased slightly in the fourth quarter, with the overall price index rising by 2.2%.
Personal spending prices (PCE index) went up 2.4%, and core prices (excluding food and energy) rose 2.6%.
Corporate Profits
Companies saw a big jump in profits, gaining $204.7 billion in the fourth quarter, reversing losses from the third quarter.
Source: U.S. Bureau of Economic Analysis
For the full year of 2024:
- GDP Growth: The U.S. economy expanded 2.8%, supported by spending, investment, government spending, and exports.
- Industry Growth: Goods-producing industries increased 3.4%, services 2.8%, and government activities 1.9%.
- Prices: Costs for goods and services rose 2.4% overall. Personal spending prices went up 2.5%, while core prices increased 2.8%.
- Corporate Profits: Companies earned $281.3 billion more in 2024, showing stronger growth than in 2023.
Impacts of Report on the Stock Market
The recent report suggests that the U.S. economy grew steadily in 2024, with GDP increasing 2.4% in the fourth quarter and 2.8% for the year.
Corporate profits were strong, rebounding by $204.7 billion in the fourth quarter and totaling a $281.3 billion increase for the year. Industries like services and government showed solid growth, while goods-producing industries grew at a slower pace.
Inflation remained under control, with prices rising moderately, which is generally positive for the stock market.
However, the slowdown in GDP growth in the fourth quarter, compared to the third quarter, and challenges in some areas like investment and exports could lead to short-term market adjustments.
Overall, the report highlights a stable but slightly slowing economy, with sectors showing varied performance.
