GDP Revised to 2.4%, Initial Claims Decline—Cooling Inflation Supports Growth Outlook
By: James Hyerczyk
Updated: Mar 27, 2025, 14:12 GMT+00:00
Key Points:
- U.S. GDP was revised up to 2.4% in Q4, with consumer and government spending offsetting weak investment.
- Initial jobless claims fell to 224,000, with continued claims dropping, highlighting labor market resilience.
- Core PCE inflation eased slightly to 2.6%, bolstering expectations for a cautious Federal Reserve stance.
U.S. GDP Revised Higher to 2.4% in Q4; Labor Market Remains Stable
The economic growth in the U.S. for Q4 2024 has been adjusted upward to an annualized rate of 2.4%, as reported by the Bureau of Economic Analysis (BEA). This revision comes alongside a relatively stable labor market, with indications from jobless claims reflecting no significant deterioration.
Consumer and Government Spending Drive Q4 Expansion
The increase in GDP growth, an improvement of 0.1 percentage points from previous estimates, is primarily attributed to stronger consumer spending and government expenditure, partially mitigated by a decline in investment. The decrease in imports, which detracts from GDP calculations, also contributed positively to this revision.
Inflation Trends Hold Steady
Despite the revisions, the price index for gross domestic purchases rose moderately by 2.2% in Q4, signaling a slight easing in inflationary pressures. This relief reinforces a cautious Federal Reserve approach, keeping the economy on a steady course.
Corporate Profits See Robust Rebound
In a remarkable recovery, corporate profits soared by $204.7 billion in Q4 after a previous decline. For 2024, profits escalated by $281.3 billion, showcasing improved operational efficiencies across various sectors.
Jobless Claims Signal Resilient Labor Market
Jobless claims for the week ending March 22 dipped to 224,000, with the four-week average remaining stable. A decline in continuing claims and a consistent unemployment rate illustrate labor market resilience amidst localized layoffs in certain industries.
Market Forecast: Cautious Bullish Bias
The upward revision of GDP, solid profit data, and easing inflation indicators present a cautiously optimistic short-term market outlook, suggesting potential support for equities and risk assets in the near future.
Summary
The revised GDP figure and promising economic indicators such as lower jobless claims support a growth outlook for the U.S. economy, although ongoing investment challenges remain present.
Opinion & Analysis
With the labor market showing resilience and inflation gradually easing, the market reflects cautious optimism. Investors, keep a close eye on economic developments as we navigate through 2025!