Barring yet another blip in the federal government’s operating schedule, the delayed report for the fourth quarter is set for release in two weeks (February 20). When the update arrives, it is on track to report a soft but resilient expansion in the final quarter of last year, based on the median for a set of nine casts compiled by the Capital Observer.
Today’s update indicates 2.7% annual growth for Q4. That’s down significantly from Q3’s 4.4% pace. Despite the expected downward shift, the Q4 forecast, if accurate, would confirm the US economic resilience that prevails in late 2025.
Economic data from other sources unaffected by the government shutdown already highlight a strong possibility that the economic expansion continued into January through December. For example, the Dallas Fed’s weekly economic index (WEI) reflects a stable, moderate year-over-year trend in GDP over recent history.
Survey data for December and January also suggest that the growth bias persists. “Continued growth in the services sector, led by a strong increase in manufacturing output in January, indicates that the economy is growing at an annualized rate of 1.7 percent,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
In some quarters, months of recession worries seem misplaced once again. This does not mean that the economy does not face challenges. But American resilience is not easily displaced, which is surprising, given the turmoil over trade, monetary policy and elsewhere in the past year.
“The textbooks say uncertainty is bad for economic growth, but there’s not much evidence that it’s had a significant impact on the U.S. economy so far,” said Neil Shearing, Group Chief Economist at Capital Economics. “Business investment is the first place you’d expect it to show up, but it’s strong.”
Exactly why US growth has held up better than expected will take time to unravel. In the meantime, it is fair to say that 2025 is set to go down in the history books as a year that defied experts in terms of growth persistence.
During a conference last week at the think tank, Ben Harris, director of economics at the Brookings Institution, said, “If you walked into a room with 100 economists a year ago and told them these developments today, I suspect that in practice the plan would project that the U.S. economy would be at best and worst at worst.”
He added: “Why did simultaneous shocks, not previously thought to be catastrophic, derail the economy? I see four possible explanations. The shocks are not as large as some people think, their negative effects are compensated for. More damaging than what we have seen so far.