Real GDP growth slowed in the fourth quarter of 2024, but the economy finished the year at a solid rate. While consumer spending continued to drive growth, gross private domestic investment detracted over a full percentage point mainly due to a decline in private inventories.

According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) expanded at an annual rate of 2.3% in the fourth quarter of 2024, following a 3.1% gain in the third quarter of 2024. This quarter’s growth was higher than NAHB’s forecast of a 1.8% increase.

Furthermore, the data from the GDP report suggests that inflationary pressure persisted at the end of 2024. The GDP price index rose 2.2% for the fourth quarter, up from a 1.9% increase in the third quarter of 2024. The Personal Consumption Expenditures Price (PCE) Index, which measures inflation (or deflation) across various consumer expenses and reflects changes in consumer behavior, rose 2.3% in the fourth quarter. This is up from a 1.5% increase in the third quarter of 2024.

For the full year, real GDP grew at a healthy rate of 2.8% in 2024. It was slightly slower than the 2023 level of a 2.9% increase and matched NAHB’s forecast.

This quarter’s increase in real GDP primarily reflected increases in consumer spending, and government spending.

Consumer spending, the backbone of the U.S. economy, rose at an annual rate of 4.2% in the fourth quarter. This marks the highest annual growth rate since the first quarter of 2023. The increase in consumer spending reflected increases in both goods and services. While goods spending increased at a 6.6% annual rate, expenditures for services increased at a 3.1% annual rate.

In the fourth quarter, government spending increased at a 2.5% rate.

Nonresidential fixed investment decreased 2.2% in the fourth quarter. The decrease in nonresidential fixed investment reflected decreases in equipment (-7.8%) and structures (-1.1%). Meanwhile, residential fixed investment increased 5.3% in the fourth quarter after two consecutive quarters of declines. Within residential fixed investment, single-family structures rose 3.1% at an annual rate, improvements increased 2.7%, while multifamily structures declined 7.2%.

Compared to the third quarter, the deceleration in real GDP in the fourth quarter primarily reflected

downturns in gross private domestic investment and exports. Inventories fell and dragged down the contribution to real GDP by 0.93 percentage points. Imports decreased.

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