U.S. Q4 GDP Slows to 2.3% as Investment Drops; Inflation Rises, Jobless Claims Decline

More Information in our Economic Calendar. Investment and Exports Weigh on Growth The primary drag on GDP in Q4 came from declining private investment and a downturn in exports. While consumer spending remained resilient, business spending weakened, signaling potential caution amid tighter financial conditions. Imports, which subtract from GDP calculations, also declined, partially offsetting the weaker trade performance.

Government expenditures helped stabilize growth, contributing positively to overall GDP. However, with investment slowing, markets will closely watch corporate earnings and credit conditions for signs of further weakening in business confidence.

Inflation Accelerates Slightly Inflationary pressures ticked higher in Q4, with the gross domestic purchases price index rising 2.2%, up from 1.9% in Q3. The PCE price index climbed 2.3%, suggesting that inflation remains slightly above the Federal Reserve’s 2% target but is far from the highs seen in previous years.

Excluding volatile food and energy components, core PCE inflation reached 2.5%, compared to 2.2% in the prior quarter. While the data suggests inflation is moderating over the long term, the recent uptick may influence Fed policymakers as they assess the timing of potential rate cuts.

Jobless Claims Decline, Labor Market Remains Tight Weekly jobless claims fell to 207,000 for the week ending January 25, down 16,000 from the previous week. The four-week moving average edged slightly lower to 212,500, reinforcing signs of a still-tight labor market.

Continuing unemployment claims declined by 42,000 to 1.86 million, though the four-week moving average rose slightly to 1.87 million. The insured unemployment rate remained steady at 1.2%, indicating that layoffs remain low despite economic deceleration.