US economy grew faster than expected in Q4 (GDP)

US Gross domestic product expanded by 3.4% year-on-year in the last three months of 2024, surpassing the previously reported 3.2% and exceeding forecasts for 3.2% growth. This revised estimate in the third assessment of fourth-quarter GDP indicates a more robust economic performance than initially anticipated.

The US economy’s growth rate of 3.4% in the fourth quarter surpasses the Federal Reserve’s benchmark for non-inflationary growth, which stands at 1.8%. Despite significant interest rate hikes totaling 525 basis points by the US central bank since March 2022 to curb inflation, the economy continues to outperform its global counterparts.

When measured from the income side, the economy expanded at an even more robust rate of 4.8%. This surge in Gross Domestic Income (GDI) reflects increased wages, indicating a resilient labor market that is supporting elevated wage growth and driving consumer spending.

Gross domestic income (GDI) increased at a faster pace compared to GDP, which raised concerns among economists in prior quarters about the strength of the economy. While GDP and GDI should theoretically be equal, differences arise due to variations in data sources and estimation methods.

The strong performance in GDI underscores the underlying strength of the US economy, supported by factors such as resilient labor market conditions, elevated wage growth, and sustained consumer spending. These factors contribute to the overall robustness of economic activity in the United States.

The US economy’s overall performance in the fourth quarter of 2024 indicates resilience and strength, driven by solid consumer spending and business investment, despite the challenges posed by inflationary pressures and interest rate hikes by the Federal Reserve.