Real GDP headline growth of 2.3 percent quarter-over-quarter annualized masked a stronger underlying pace of growth in the economy at the end of 2024.

Final sales to domestic purchasers (GDP excluding trade and inventories) grew at a more robust 3.1 percent pace. While consumer performance remained extremely solid throughout 2024, an atypical double-digit surge in durable goods consumption in Q4 hints at consumers stockpiling behavior ahead of anticipated tariff-driven price increases. Such strength may borrow growth from the future quarters.

Trusted Insights for What’s Ahead^®

• The economy ending 2024 on a healthy note (GDP grew 2.5 percent year-over-year) provides solid ground for the Fed to remain patient with respect to further normalization of policy rates in H1 2025.
• We expect the Fed to stay on hold throughout H1 2025 and resume cuts in the latter half of this year as growth slows closer to potential and inflation returns to its downward trajectory.
• Robust consumer performance at the end of 2024 may pull some strength forward at the expense of future quarters as consumers appear to be stockpiling on computers and other information processing equipment and light trucks ahead of tariffs.
• Surprisingly, there was a positive contribution from imports (goods imports fell 4.0 percent in Q4 in today’s data). The decline was despite source data showing a sharp increase in imports of industrial materials and consumer goods at the end of the year, according to the advance estimate of trade in goods. Imports enter GDP accounting with a negative sign and a surge in imports in December may lead to downward revisions in this GDP category as more data become available.

Figure 1. Consumers Overwhelmingly Drove Q4 GDP Growth

Sources: Bureau of Economic Analysis and The Conference Board.

Report Highlights

Economy ends 2024 on a strong note. Real GDP grew by 2.3 percent in the fourth quarter, close to our estimate of 2.5 percent, after growing at a 3.1 percent pace in Q3. In 2024, GDP grew at 2.5% Q4/Q4, compared to a stellar 3.1% performance in 2023. Real GDP in 2024 grew by a solid 2.8 year-over-year following a 2.9 percent rate of growth in 2023. We estimate growth will slow further in 2025 closer to potential as the economy continues to normalize post-pandemic.

Gains in Q4 were driven by a surge in consumer spending on goods and services, which contributed 2.8 percentage points to growth. Additionally, government spending contributed 0.4 percentage points in Q4. Meanwhile, fixed business investment and inventories subtracted 1.2 percentage points combined from growth in Q4.

Consumers stockpiled on durables, spent on healthcare. According to the BEA’s press release, the increase in goods was led by spending on information processing equipment and new light trucks, goods that could potentially be affected by the imposition of tariffs. Services growth was led by hospital and nursing home services (notably hospital services) and outpatient services.

Inventories weigh on growth. Inventories were a drag on growth, likely due to a surge in consumer spending at the end of the year, which depleted available inventories.

Investment performance mixed. Within nonresidential fixed investment, increases in intellectual property products were offset by a decrease in structures and equipment. Residential structures eked out a modest gain.

Net exports contribution flat. The decline in exports roughly offset an increase in imports yielding a flat contribution to growth in the quarter. This could potentially be revised lower, we estimate, as more source data become available (Picture 2).

Hurricane Milton impact. The release included a note on the impact of Hurricane Milton, which hit the Southeast of the country in early October. The BEA concluded that “it is not possible to estimate the overall impact” as “the destruction of fixed assets, such as residential and nonresidential structures, does not directly affect GDP or personal income.” Rebuilding activities may support growth in residential and nonresidential investment in future quarters.

Figure 2. Surge in Imports May Imply Lower Net Exports Contribution in Q4

Sources: Bureau of Economic Analysis and The Conference Board.