The economy is strong but inflation is difficult to tame! US Q4 GDP grew at a steady pace of 2.3%, while core PCE was unexpectedly revised upwards.

By the end of 2024, the US economy was growing at a steady pace, but inflation proved to be more stubborn than initially estimated at the end of 2024. Data released by the US Bureau of Economic Analysis on Thursday showed that the fourth quarter real GDP was revised up by 2.3% on an annualized basis, in line with the initial estimate. The main growth engine of the economy - consumer spending - grew at a rate of 4.2%. The Federal Reserve's preferred indicator - the Personal Consumption Expenditures (PCE) price index excluding food and energy - rose by 2.7%, faster than the initially reported 2.5%. The January PCE report, scheduled for release on Friday, is expected to show a 2.6% year-on-year increase in core inflation. The report indicated that the US economy continued to grow steadily with strong support from consumer spending. While higher interest rates and rising cost of living have put greater pressure on low-income families, many Americans have benefited from healthy wage increases and job opportunities. However, the outlook for the world's largest economy is turning more dim. After growing by 2.8% in 2024, GDP is projected to increase by 2.3% this year as slowing job growth dampens consumer demand. Additionally, due to stubborn inflation, Federal Reserve policymakers are cautious about future interest rate cuts. Monthly data, to be released on Friday, is expected to show the first decrease in personal spending adjusted for inflation in a year following a strong holiday shopping season. In addition to household demand, the report also indicated that business investment was weaker than initially reported. Equipment spending revised down by 9% on an annualized rate, while the value of intellectual property products remained nearly unchanged.