GDP: US economy grows at slower-than-expected pace in fourth quarter

Published On Jan 30, 2025, 12:55 PM

The US economy's growth slowed in the fourth quarter, with an annualized growth rate of 2.3%, which fell short of the 2.6% expected by economists. Consumer spending and government expenditure contributed positively to growth, while business investment saw a decline. The overall GDP for the year was 2.8%, slightly down from the previous year's 2.9%. The Federal Reserve's stance on interest rates remains cautious due to persistent inflation, and expectations for rate cuts have been tempered.

Stock Forecasts

XLY

Positive

With slower growth reported and a decline in business investment, it may indicate potential weakness in sectors relying heavily on business spending. However, strong consumer spending may counterbalance some of this weakness, suggesting that consumer-driven sectors may still see positive growth. Investors should be cautious but may find opportunities within consumer discretionary and staples sectors due to strong consumer demand.

XLP

Positive

Given the slow GDP growth and ongoing inflation pressures, defensive positions in quality stocks or ETFs could be more favorable in the short term. Sectors that benefit from stable consumer spending might do better in uncertain economic conditions. Investors may want to look at utility ETFs for relative stability during this period of slower economic growth.

Related News

The world's largest economy missed forecasts after expanding at 2.3% between October and December.

Faced with a solid economy and mounting inflation concerns, the U.S. central bank has said it will “move cautiously” on cutting interest rates.

XLF
XLP

Retailers are facing relentless competition from controversial fast-fashion companies Shein and Temu, according to Coresight Research, which anticipates 15,000 retail closures this year.