US GDP growth plunges, with Q4 revised to 0.7% instead of the expected 1.4%

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1 day ago

GDP Revision Shock

The Bureau of Economic Analysis cut the U.S. Q4 2024 GDP growth to a 0.7% annual rate, far below the 1.4% preview and the slowest expansion in three quarters. Revised data show consumer spending rose only 1.8%, business investment fell 2.1%, and government outlays added modestly to growth. A narrower trade deficit and smaller inventory buildup also dragged the figure down, prompting market surprise.

Underlying Drivers

Higher Fed interest rates began to curb borrowing and spending, weakening consumer confidence amid persistent inflation. Global demand softened, reducing exports of manufactured goods and agriculture. Manufacturing output contracted, residential investment fell 3.2%, and equipment spending slipped 1.9%, highlighting sectoral strain.

Market and Policy Reaction

Treasury yields dropped, with the 10‑year yield falling 8 basis points, while tech stocks rose and financials slipped. Analysts warn the revision signals deeper softening, but caution that single‑quarter swings can be statistical. The Fed is expected to weigh the data closely before adjusting its policy stance.

Future Outlook

First‑quarter 2025 indicators are mixed: consumer spending appears resilient, yet manufacturing surveys show ongoing contraction. Economists now forecast full‑year 2025 growth of 1.5%‑2.0%, down from earlier 2.0%‑2.5% estimates. The revision may lead businesses to temper investment and hiring plans as policymakers balance inflation control with growth support.