U.S. economic growth likely slowed in Q4 due to a surge in imports and a Boeing strike, though strong domestic demand kept momentum intact. The Commerce Department’s GDP report is expected to show consumer spending remained robust, driven by solid wage gains. Despite the slowdown from Q3’s 3.1% growth, the economy defied recession fears despite aggressive Fed rate hikes.
GDP likely grew at a 2.6% annualized rate, down from Q3, with estimates ranging from 1.7% to 3.2%. A record-high goods trade deficit in December led the Atlanta Fed to cut its GDP forecast to 2.3% from 3.2%. The full-year growth estimate stands at 2.8%, slightly below 2023’s 2.9%.
The Fed left interest rates unchanged at 4.25%-4.50%, signaling only two rate cuts this year, down from four previously forecasted. Uncertainty over Trump administration policies, including tax cuts, tariffs, and immigration actions, raises concerns about inflation and slower growth.
Anticipation of tariffs and a ports strike drove businesses to front-load imports, widening the trade deficit and likely subtracting a full percentage point from GDP. Inventory accumulation was also weak, though consumer spending remained strong.
A Boeing strike in Q4 disrupted aircraft production, affecting business investment in equipment, though AI-driven intellectual property spending provided a boost. Residential investment likely rebounded, but high mortgage rates remain a challenge. Government spending growth was moderate, with potential cuts looming under Trump’s fiscal plans.
Final sales to private domestic purchasers, a key demand indicator, likely remained near Q3’s 3.4% pace. Inflation edged higher, adding to economic uncertainty heading into 2024.
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