Second estimate of U.S. growth confirms 2.3% expansion in fourth quarter

The U.S. economy advanced at a healthy pace and inflation was more stubborn than initially estimated at the end of 2024.

Gross domestic product increased at an unrevised 2.3% annualized pace in the fourth quarter, according to the Bureau of Economic Analysis out Thursday. The economy’s primary growth engine—consumer spending—advanced at a 4.2% pace.

The Federal Reserve’s preferred metric—the personal consumption expenditures price index excluding food and energy—climbed 2.7%, faster than the 2.5% initially reported. That was driven mainly by services costs.

The January PCE report, due Friday, is currently projected to show the core metric rose 2.6% from a year ago.

The report showcases an economy that continued to expand at a solid pace on the shoulders of resilient consumer spending. While elevated interest rates and a higher cost of living are taking a bigger toll on lower-income households, many Americans are benefiting from healthy pay growth and hiring.

The outlook for the world’s largest economy is more muted, however. After expanding 2.8% in 2024, GDP is seen rising 2.3% this year as cooler job growth tempers consumer demand. Moreover, Federal Reserve policymakers have grown cautious about future interest-rate cuts as inflation proves sticky.

Monthly figures on Friday are forecast to show the first decline in inflation-adjusted personal spending in a year after a robust holiday-shopping season.

Jobless claims

Separate government data out Thursday showed initial applications for unemployment benefits jumped 22,000 last week to the highest level this year.

Beyond household demand, the report showed government spending was marked higher while business investment was weaker than initially reported. Spending on equipment fell at a revised 9% annualized rate, while the value of intellectual property products was little changed.

Separate figures Thursday showed a pickup in capital goods shipments and orders in January that included a rebound in commercial aircraft months after the resolution of a machinists’ strike at Boeing Co. That may add to economic growth in the first quarter and help offset expected drags from homebuilding and trade.

National Association of Realtors data, also released Thursday, underscored the impact on the housing market last month from high borrowing costs as well as severe winter weather. A gauge of contract signings on previously owned homes slid 4.6% to a record low as activity tumbled in the South.

Inflation has been showing signs of revival in recent months, with reports on consumer and producer prices, as well as labor and input costs, all pointing to stubborn cost pressures. After lowering interest rates by a full percentage point last year, Fed officials now want to see further progress on inflation before any additional rate cuts.

Central bankers have also highlighted uncertainty around President Donald Trump’s economic agenda as a reason to stay put. While some of his proposed policies, including tax cuts, are generally seen supporting growth, others like tariffs and mass deportations could fuel inflation.