In the fourth quarter, GDP increased by 3.4 percent, exceeding expectations of 3.2 percent but falling short of the substantial 4.9 percent growth in the third quarter, as reported by the Commerce Department. Corporate profits spiked in the fourth quarter, reaching a new all-time high, thanks to increased productivity that balanced out unit labor costs.
Economist Lydia Boussour from EY noted in her analysis that before-tax corporate profits saw the most significant increase since the second quarter of 2022, rising by $133 billion. Profit margins expanded for the second quarter in a row, climbing by 0.3 percentage points to 12.2 percent of GDP.
Inflation dropped to 2 percent in the fourth quarter based on the “core” PCE price index, which excludes food and energy prices – the preferred inflation measure by the Federal Reserve. New monthly core PCE data is set to be released on Friday, indicating a potential year-over-year increase of up to 7 percent for January.
Market analysts were pleased with the latest GDP figures, with Michelle Cluver, head of ETF portfolios at Global X, highlighting the U.S. economy’s continued resilience despite global economic challenges such as trade tensions and geopolitical instability. She also commended the positive contribution from consumer spending and nonresidential fixed investment to the upward revision of GDP growth in Q4.
The Hill’s Tobias Burns offered more insights on how these latest figures reflect an overall trend towards stronger economic performance across key sectors like technology and healthcare.
