• Weakest since Q1 2023
  • Final Q4 reading was +3.3% annualized (revised to +3.4%)
  • Q3 was +4.9% annualized


  • Consumer spending +2.5% vs +3.3% prior
  • Consumer spending on durables -2.1% vs +3.2% prior
  • GDP final sales 2.0% vs +3.9% prior
  • GDP deflator 3.1% vs 3.0% expected (1.7% prior)
  • Core PCE +3.7% vs +3.4% expected (+2.0% prior)
  • Business investment +3.2% vs +0.7% prior

Percentage point changes:

  • Net trade pp -0.86 vs +0.32 pp prior
  • Inventories -0.37 pp vs -0.47 pp prior
  • Govt +0.21pp vs +0.79 pp prior

The market was pricing in 41.5 bps of Fed rate cuts this year with the July meeting priced roughly 50/50 ahead of the data. The market is focused on the hotter PCE numbers in the report afterwards and priced in a more-hawkish Fed at 36.5 bps. It's notable that tomorrow we get the PCE report and the market is adjusting to price in something a tad hotter.

As for GDP itself, inventories may help to explain some of the delta as the March wholesale inventory data released alongside this report fell 0.4%. Ultimately though, you take it at face value at 1.6% annualized growth isn't the kind of thing that's going to spur demand-driven inflation. With that, I think the market is too focused on tomorrow's PCE report here and no focused enough on a slowing economy and what it will mean for PCE report in the months beyond.

When you go through a lot of the details, it's healthcare spending (that's the USA) and non-residential fixed investment (IRA and CHIPS Act). Goods spending subtracted 0.09 pp from GDP.