U.S. Final GDP Q4 2024: Key Factors to Monitor!

Investors are bracing for the release of the U.S. Final GDP data for Q4 2024, to be released on Thursday, March 27, 2025. This report is expected to display a slight upward revision to 2.4% quarter-over-quarter, from the previous result of 2.3%. As this is the last reading of the  U.S economy’s performance in 2024, this report will provide important confirmation of how resilient growth was heading into the new year, and how this will now align with recent shifts in labor, inflation, and consumer data.

Moderate Growth in Focus: Reassessing the U.S. Economic Narrative

While the economy has defied expectations of a sharp downturn, recent economic data suggests that momentum may be slowing, driven by the impact of the tariffs that US President Donald Trump began imposing the day after his inauguration on January 20. 

Given concerns about deepening economic uncertainty in both the US and global markets, a reading higher than the previous quarter's reading could confirm strong performance in 2024. Investors will continue to focus increasingly on whether this growth will continue into early 2025, particularly during the first quarter. 

The pace of events and influences increased during the first quarter of this year, driven by geopolitical tensions and mutual tariffs between the US and its major trading partners, although many of these have yet to take effect.

GDP components previously showed strong consumer spending and stable business investment, though trade and inventories remain swing factors that could affect the final result.

A 2.4% reading would still reflect above-trend growth, but  participants of the market are weighing that against a softening backdrop.

Supporting Indicators: A Mixed Bag

Jobs: Labor Market Losing Steam

The ADP Employment Report released on March 5 showed a slowdown in private-sector hiring, with as little as 77,000 new jobs added in February—a sharp downturn from 183,000 in January. While unemployment remains low, this abrupt deceleration raises questions about underlying labor market strength, especially if it spills over into consumer confidence and spending.

Inflation: Encouraging Signs for the Fed

The CPI report on March 12th showed headline inflation easing to 2.8% year-over-year, which was below the forecasted 2.9% and below the figure of 3.0% in January. This continued down trend supports the ongoing narrative that the price pressures are slowly and gradually subsiding,  which is aligning with the Fed’s long-term inflation targets. Core inflation also did show moderation, further relieving pressure on monetary policymakers.

Retail Sales: Consumers Cautious

Retail sales data which was released early this month also seemed to point to a more cautious consumer. With Sales rising only 0.2% in February, missing the 0.6% forecast, but still rebounding from January’s -1.2% contraction. The weak spending may weigh on GDP in early 2025 if the trend does continue, especially as pandemic-era savings dwindle and higher interest rates continue to bite.

Policy Implications: Data-Dependent Federal Reserve to Stay the Course

The Fed kept interest rates unchanged in it’s meeting earlier this month, with Chair Jerome Powell reaffirming a data-driven stance. While inflation is moving closer to the target, the Fed is likely to remain cautious, wanting more evidence of sustainable disinflation before starting to cut rates.

The Fed funds rate was held at 4.5%, unchanged from the previous decision, and in line with market expectations. While the Fed did leave interest rates unchanged as expected, it also lowered its forecast for US economic growth for 2025 from 2.4% to 1.7%

If the final GDP result surprises to the upside and coincides with sticky inflation, it may likely prompt markets to push out expectations for the first rate cut, currently priced in around mid-2025. 

Market Watch: Dollar, Yields, and Equities in Play

A stronger GDP reading would likely boost the U.S. Treasury yields and support the dollar, as investors would reassess rate cut expectations. However, with employment and retail trends showing softness, risk assets like equities could rally if markets interpret the data as a sign of an approaching policy pivot.

Conversely, if the GDP print is weaker than forecast—or if upward revisions fail to materialize—markets could likely respond with increased expectations for earlier monetary easing, weighing in on the dollar and lifting safe-haven assets like gold.

As a result,

According to analysts and global financial institutions, forecasts indicate that the US economy is currently experiencing a period of uncertainty and fears of a slowdown in its growth. Although this reading represents the fourth quarter of last year, before Trump assumed the White House, it may provide an indication of the strength of the US economy and its ability to withstand the impact of tariffs in the short term, or the potential for further suffering if the final reading is lower or below expectations.