Source: Economics Group of Wells Fargo Bank, N.A.
Summary
The U.S. economy expanded at a 2.3% annualized rate in Q4. Growth was held back by a slower stockpiling in inventories, but boosted by solid consumer spending, both of which may partially reflect a pull forward in demand ahead of potential tariffs. The economy entered the year with momentum, but tariff risks loom.
Inventories Hold Back Q4 GDP
The U.S. economy expanded at a 2.3% annualized rate in the fourth quarter—that’s a step down from the post-pandemic average (3.2%) but roughly in line with the average quarterly rate that prevailed in the last expansion that stretched from 2010-19 (2.4%). Further economic growth held up better than the Q4 growth rate implies as a slower stockpiling in inventories dramatically dented on output. Inventories alone sliced 0.9 percentage points off of headline GDP growth in the fourth quarter (chart), which we expect partially reflects a pull forward in demand amid concerns over tariffs toward the tail-end of last year.