The U.S. economy grew at a slower pace than expected in the fourth quarter of 2024. Real gross domestic product increased at an annual rate of 2.3% in Q4 2024, according to the advance estimate. The latest estimate is below the forecasted 2.7% growth and is slower than the Q3 final estimate of 3.1%.
Here is the opening text from the Bureau of Economic Analysis news release:
Real gross domestic product (GDP) increased at an annual rate of 2.3 percent in the fourth quarter of 2024, according to the advance estimate. In the third quarter, real GDP increased 3.1 percent. The increase in real GDP in the fourth quarter primarily reflected increases in consumer spending and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased.
Gross Domestic Product (GDP)
Real gross domestic product (GDP) measures how fast or slowly the economy is growing and measures the inflation-adjusted value of all goods and services produced by the economy. It is considered the broadest measure of economic activity and the primary indicator of an economy's health. The Bureaus of Economic Analysis (BEA) releases real GDP data on a monthly basis. There are 3 versions released a month apart, advance, second, and final, each incorporating data that was previously unavailable. Economists can use GDP to determine whether an economy is growing or experiencing a recession.
Here is a look at quarterly GDP since Q2 1947. Prior to 1947, GDP was an annual calculation. To be more precise, the chart shows the annualized percentage change from the preceding quarter in real (inflation-adjusted) gross domestic product. We've also included recessions, which are determined by the National Bureau of Economic Research (NBER). Also illustrated are the 3.21% average (arithmetic mean) and the 10-year moving average, currently at 2.71%. As you can see, the 10-year moving average fell below the historical average in 2007 and has been there ever since, illustrating that US economic growth has slowed dramatically since the Great Recession.
We are currently at a level below both the 10-year moving average and the series average, indicating the current economic growth is on the historically slower end.
The chart above has many interesting data points but can be quite overwhelming to look at. This next chart is a simplified version starting in 2007.
Here is a log-scale chart of real GDP with an exponential regression, which helps us understand growth cycles since the 1947 inception of quarterly GDP. The regression illustrates the fact that the current trend, since the Great Recession, has a visibly lower slope than the long-term trend. In fact, the current GDP is 12.5% below the pre-recession trend (2008).
A particularly telling representation of slowing growth in the US economy is the year-over-year rate of change. Beginning in 1947, the average year-over-year rate at the start of recessions is 3.2% with a range of 1.28% to 6.78%. The current year-over-year rate for real GDP is at 2.48%, a level at or below 6 of the 12 recession starts during this time frame.
GDP: A Look Ahead
In the chart below, we use the Conference Board's Economic Forecast for the U.S. Economy to visualize GDP forecast over the next few years.
The economy should expand at an upwardly revised pace of 2.3% in 2025 (from 2.0% in the December forecast) or 2.0% Q4/Q4 in 2025 (from 1.8%). U.S. real GDP growth in 2026 should settle at or slightly below its potential rate. Inflation should continue to normalize toward the Fed’s 2% target, but likely will stabilize there by the middle of 2026. Against this backdrop, the Fed will likely remain patient and leave rates unchanged in H1 2025, but could resume normalizing policy in July and cut rates three times by year-end, barring a significant pick-up in inflation on the back of aggressive tariff and immigration policies. In that case, the Fed could remain on pause for longer. The Fed will likely reach the long-run neutral rate target range of 3.00-3.25% by mid-2026. However, we believe the bar is too high for policy rate increases and we still see a rate cut as the next policy move.
For a closer look at each of the subcomponents of GDP, check out our commentary An Inside Look at GDP.
For another perspective on GDP, check out our commentary Real GDP Per Capita.
Read more updates by Jen Nash
Here is a log-scale chart of real GDP with an exponential regression, which helps us understand growth cycles since the 1947 inception of quarterly GDP. The regression illustrates the fact that the current trend, since the Great Recession, has a visibly lower slope than the long-term trend. In fact, the current GDP is 12.5% below the pre-recession trend (2008).
