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Atlanta Fed GDPNow Estimate Suggests Slower Q4 Growth but Maintains Positive Momentum

AInvestFriday, Jan 3, 2025 3:20 pm ET
1min read

The Atlanta Federal Reserve’s latest GDPNow model estimate for fourth-quarter 2024 GDP growth has been adjusted downward to 2.4 percent, compared to 2.6 percent on January 2.

While the revised estimate represents a modest deceleration, it still signals a positive growth trajectory for the quarter, following a robust 3.1 percent annualized GDP growth in the third quarter.

This adjustment was primarily influenced by updated data from the Manufacturing ISM Report on Business. The new data prompted reductions in nowcasts for two key components of GDP:

- Real personal consumption expenditures growth was revised from 3.2 percent to 3.0 percent, indicating slightly softer consumer spending.

- Real gross private domestic investment growth was adjusted from -0.7 percent to -0.9 percent, reflecting deeper declines in business investment.

Despite the downward revisions, a 2.4 percent growth rate underscores continued resilience in the US economy, even as it confronts challenges such as elevated interest rates, lingering inflationary pressures, and ongoing global uncertainties.

The GDPNow model’s peak estimate for Q4, recorded at 3.4 percent on December 11, has gradually declined due to a mix of economic headwinds and softer-than-anticipated data releases. Nevertheless, the current estimate is a testament to the economy’s ability to sustain a moderate pace of growth as 2024 concluded.

Key takeaways include:

- Consumer spending remains a bright spot, although slightly softer than previously expected. A strong labor market and improving wage trends continue to support consumption activity.

- Weakness in business investment persists, driven by uncertainties surrounding economic policy and ongoing geopolitical tensions. This drag highlights potential vulnerabilities that could weigh on growth if unaddressed.

- The manufacturing sector, as reflected in the ISM data, faces challenges that align with broader industrial slowdowns seen in other advanced economies.

Looking ahead, the Atlanta Fed’s GDPNow model will release its next update on January 7. Market participants and policymakers will closely monitor subsequent data points for further indications of the economy’s trajectory.

While Q4 growth is expected to be solid, the pace of expansion will remain a focal point for discussions on monetary policy and fiscal strategies as the US economy enters 2025.

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