Record Corporate Profits and Stable GDP: An Economic Overview of the Fourth Quarter in the US

In the fourth quarter, the US economy experienced a 3.4% increase in GDP, surpassing recent forecasts of 3.2% and falling short of the 4.9% growth seen in the third quarter, according to data from the Commerce Department. Despite this, before-tax corporate profits reached a new record high of $2.8 trillion, increasing by 3.9%, beating expectations of 3.3%.

Corporate profits saw a substantial increase in the fourth quarter, reaching a new record high due to faster productivity and stringent cost controls. This was revealed in an analysis by EY economist Lydia Boussour. Before-tax corporate profits increased by $133 billion, which is the largest increase since the second quarter of 2022. Profit margins also expanded for the second consecutive quarter, reaching 12.2% of GDP.

Inflation fell to 2% in the fourth quarter based on the “core” personal consumption expenditures (PCE) price index, excluding food and energy categories and preferred inflation gauge of the Federal Reserve. New monthly core PCE data is expected to be released on Friday, recording a 2.8% year-over-year increase in January.

Market commentators have praised the latest GDP readings, citing resilience in consumer spending and nonresidential fixed investment as positive trends for the US economy. Michelle Cluver from Global X emphasized these trends while head of ETF portfolios at Global X focused more on consumer spending and nonresidential fixed investment insights provided by The Hill’s Tobias Burns.