Economy Picks Up Steam, But Can It Handle the Headwinds?

​The U.S. economy didn’t just limp across the 2024 finish line—it sprinted. In the final quarter, GDP jumped at a 2.4% annualized rate, outpacing earlier estimates, while corporate profits soared 5.9%, the biggest leap in more than two years. It was a strong closing act that suggested businesses were thriving even as geopolitical uncertainties swirled.

The profit party wasn’t just about flashy numbers. After-tax earnings, as a percentage of gross value added for non-financial firms, hit 15.9%, a level that harks back to pre-pandemic boom times. Translation? Companies still have room to absorb rising costs—like tariffs—without hiking prices for consumers. That’s a rare cushion in an otherwise shaky global economy.

Inflation also offered a bit of relief. The Fed’s favorite measure—the PCE price index, minus food and energy—was quietly revised down to 2.6%. Lower inflation with higher profits? That’s a combination central bankers dream of.

But not everything’s glittering. Analysts are starting to worry that 2025 won’t be so smooth. Trade tensions, especially under the Trump administration’s increasingly combative stance, have markets jittery. The Fed, Goldman Sachs, and Morgan Stanley have all trimmed growth forecasts. The reason? A surge in imports early in the year—companies scrambling to stockpile ahead of expected tariffs—might actually drag first-quarter GDP into negative territory.

Consumer spending, typically the powerhouse of U.S. growth, was revised down slightly to 4%. Business investment and government spending saw upward tweaks, helping prop things up. Meanwhile, gross domestic income (GDI), the lesser-known sibling to GDP that focuses on earnings and costs rather than spending, shot up 4.5%, adding to the sense that corporate America ended 2024 with money in the bank and optimism in the air.

Still, the forward-looking picture is cloudier. With the trade deficit remaining stubbornly high and political uncertainty casting long shadows, investors are watching closely for cracks. The coming months will test whether this momentum has legs—or if it was just a final hurrah before the next slowdown.





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