US Economy Grew 2.4% Last Quarter As Corporate Profits Jumped

The US economy expanded at a faster pace in the fourth quarter than previously estimated amid a robust increase in corporate profits.

Gross domestic product advanced at a 2.4% annualized rate in the October-to-December period, the third release of the figures from the Bureau of Economic Analysis showed Thursday. The Federal Reserve's preferred inflation metric — the personal consumption expenditures price index excluding food and energy — was revised down to 2.6%.

The figures also showed after-tax profits rose 5.9% in the fourth quarter, the most in more than two years. Profits as a share of gross value added for non-financial corporations, a measure of aggregate profit margins, widened to 15.9% — remaining well above levels that prevailed from the 1950s to the onset of the pandemic in 2020.

Those data suggest US companies may have room to absorb higher costs from tariffs this year without passing them along to consumers.

Economists generally anticipate slower growth in 2025 as consumers and businesses grow wary of President Donald Trump's economic agenda. The administration's aggressive trade policy prompted Fed officials last week to mark down their forecasts, and Wall Street giants including Goldman Sachs and Morgan Stanley have made similar changes.

The fourth-quarter GDP numbers were boosted by upward revisions to net exports, government spending and business investment. Growth in consumer spending — which accounts for two-thirds of GDP — was marked lower to 4%.

The government's other main gauge of economic activity — gross domestic income — rose 4.5% after a 1.4% increase in the third quarter. While GDP measures spending on goods and services, GDI measures income generated and costs incurred from producing them. The average of the two growth measures last quarter was 3.5%, the most in a year.

Separate reports Thursday showed initial applications for unemployment benefits were little changed at 224,000 last week, while the trade deficit narrowed in February from January's record high.

The February PCE report, which will show the latest data on consumer spending and inflation, is due Friday.