February 27, 2025
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The preliminary estimate of fourth quarter GDP was 2.3% which is identical to the advance estimate. This compares to GDP growth of 3.1% in the third quarter. Growth in the past year has been 2.5%
Final sales, which is GDP excluding the change in business inventories, rose 3.2% in the fourth quarter versus 3.3% in the third quarter Given an increase in GDP of 2.3% and a 3.2% increase in final sales, the change in inventories subtracted 0.9% from GDP growth in the fourth quarter.
Final sales to domestic purchasers which excludes both the change in inventories and trade rose 3.0% in the fourth quarter after climbing 3.7% in the third quarter. With a 3.2% increase in final sales and a 3.0% increase in final sales to domestic purchasers, the trade component added 0.2% to GDP growth in the fourth quarter as exports declined 0.5% while imports declined by 1.2%.
Consumption spending jumped 4.2% in the fourth quarter after climbing 3.7% in the third quarter. Consumers continue to shrug off inflation and still high interest rates, With real disposable income rising 2.3% in the past year and personal consumption expenditures rising 3.1%, consumers will likely slow their pace of spending somewhat in 2024. They should continue to spend at a 2.3% growth rate in 2025. Spending on goods rose 6.1% in the fourth quarter while spending on services climbed by 3.3%.
Residential investment rose 5.4% in the fourth quarter after having fallen 4.3% in the third quarter. The housing market appears poised for a gradual upturn in 2025 and perhaps the fourth quarter increase is the first in a string of small, but positive, gains throughout this year.
The foreign sector as measured by the deficit for real net exports narrowed by $7.8 billion in the fourth quarter to $1,061.4 billion after having widened by $33.5 billion in the third quarter. Exports fell by 0.5% in the fourth quarter while imports declined 1.2%..
Federal government spending rose 3.9% in the fourth quarter after having jumped 7.5% in the third quarter. Defense spending rose 4.7% while nondefense spending gained 2.9%.
After growing 2.5% in 2024 we expect to see GDP growth of 2.8% in 2025. The economy keeps cranking out jobs and wages keep rising which will allow consumer income and spending to grow rapidly. AI spending should keep nonresidential investment climbing at a respectable pace.
Stephen Slifer
NumberNomics
Charleston, SC
Mr. Slifer –
The fed in last 3 months since the September spike has injected approximately $60 billion/month into the “repo” market, and plans to potentially add as much as another half trillion by mid January, according to reports in the Financial Times. Mr. Powell rejected comparisons of this with earlier Quantitative Easing, insisting it was different. Since the repo market is for overnight or short term loans, one assumes these massive amounts will be repaid promptly, though there has been no mention of that in the papers. Such massive amounts of money would seem to contribute to the bullish equity markets we’re seeing. Can you educate me as to how these injections of credit influence the market, GDP, etc?
Hi Frank,
Thanks for your comment and sorry for the delayed response. Your question is not an easy one to answer so rather than a lengthy explanation here I will respond to your personal e-mail address. Thanks for your question. it is a good one.
Steve
Steve –
The second graph in this section, “Final Sales”, has the x-axis mislabeled in regard
to the applicable dates.
Hi Frank. Merry Christmas. You are right. The data shown are for the dates I wanted, but somehow the x-axis was messed up. I changed it in the original. Thanks for the catch.
Steve