Surprising Fourth Quarter Growth and Record Corporate Profits in the U.S. Economy

In the fourth quarter, the U.S. economy saw a 3.4 percent increase in GDP, exceeding expectations of 3.2 percent but falling short of the substantial 4.9 percent growth in the third quarter. This was reported by the Commerce Department. Meanwhile, adjusted profits after taxes reached a record high of $2.8 trillion, seeing a 3.9 percent increase, surpassing the anticipated 3.3 percent rise.

Corporate profits spiked in the fourth quarter, reaching a new all-time high, as noted by economist Lydia Boussour from EY in her analysis. Before-tax corporate profits saw the most significant increase since the second quarter of 2022, rising by $133 billion. Profit margins expanded for the second quarter in a row, climbing by 0.3 percentage points to 12.2 percent of GDP due to increased productivity balancing out unit labor costs.

Inflation dropped to 2 percent in the fourth quarter based on the “core” PCE price index, which excludes food and energy prices – the preferred inflation measure by the Federal Reserve. New monthly core PCE data, indicating a 2.8 percent year-over-year increase in January, is set to be released on Friday