U.S. GDP Expected to Grow by 2.6% in Q4 2024, Underlining Healthy Economic Outlook
- The United States Gross Domestic Product (GDP) is forecast to expand at a 2.6% annualized rate in Q4 2024.
- The US economy continues to project stable and robust growth.
- The US Dollar is experiencing a recovery phase amid a cautious investment climate.
The Bureau of Economic Analysis (BEA) of the United States will unveil the preliminary estimate for GDP growth in the third quarter on Thursday. Analysts project an annualized growth rate of 2.6% for Q4 2024, a slight dip from the 3.1% reported in Q3.
What to Expect from the GDP Report
The BEA’s GDP release is a critical indicator for financial markets, offering insights into the health of the US economy. Alongside growth metrics, the report will include data on the Personal Consumption Expenditures (PCE) Price Index, which the Federal Reserve prefers for gauging inflation.
Importantly, the Federal Reserve made no changes to interest rates ahead of the GDP and PCE release, focusing on recent economic data and policy developments. The latest Summary of Economic Projections (SEP) by the Fed suggests continued economic expansion and somewhat elevated inflation expectations.
Market expectations indicate a core PCE Price Index of 2.5% for Q4, up from Q3’s figure of 2.2%. This signals ongoing price pressures within the US economy.
In addition to the core PCE and GDP figures, the GDP Price Index will be scrutinized, which tracks domestically produced goods and services prices. For Q4, this index is projected to rise by 2.5%, compared to the 1.9% increase seen in Q3.
The GDPNow model from the Federal Reserve Bank of Atlanta provides real-time GDP forecasts. On Tuesday, it estimated 3.2% real GDP growth in Q4 2024, an increase from January 17’s 3.0% projection.
Impact on the USD
The US GDP report is set to be released on Thursday at 13:30 GMT. Key indicators, including GDP figures, private domestic purchases, the GDP Price Index, and the Q4 PCE Price Index, could influence the USD’s valuation.
Strong GDP data might reinforce the Fed’s dovish stance, potentially devaluing the USD and curbing interest rate expectations. Conversely, weaker figures might reverse these trends.
Valeria Bednarik, Chief Analyst from FXStreet, commented, “The US Dollar Index (DXY) resumed gains amid a risk-averse environment but faces resistance near the January 23 high of 108.50. Pending a meaningful move above 109.00, the 109.40-109.50 range could mark a significant bullish target.” She added, “A decline below 107.75, the January 29 low, further weakens to previous monthly lows near 106.97, potentially highlighting buying opportunities, though near-term reversals remain likely due to current risk aversion.”
Understanding the US Dollar: FAQs
US Dollar FAQs
The US Dollar, the official currency of the United States, plays a pivotal role in global finance, circulating alongside local currencies in many countries. As the most traded currency worldwide, it accounts for over 88% of daily foreign exchange transactions, averaging $6.6 trillion per day. Following World War II, the USD replaced the British Pound as the global reserve currency. The USD was historically linked to Gold until the Golden Standard was abolished in 1971 due to Bretton Woods.
Monetary policy significantly impacts the USD, crafted by the Federal Reserve to stabilize prices and foster employment. The Fed’s primary tool is adjusting interest rates to manage inflation and unemployment. Higher inflation or unemployment rates could lead the Fed to raise interest rates, strengthening the USD. Conversely, lower inflation or unemployment might prompt rate cuts, weakening the currency.
In extreme cases, the Federal Reserve might print more USD and engage in quantitative easing (QE) during financial crises to boost credit flow, often weakening the currency. QE involves printing dollars to buy government bonds from financial institutions, increasing the money supply. It was a key strategy during the Great Financial Crisis. Typically, QE leads to a weaker US Dollar.
Quantitative tightening (QT) is the opposite of QE, where the Fed stops buying bonds and does not reinvest maturing bond principal. This action usually strengthens the US Dollar by decreasing the money supply.
Upcoming Economic Indicator: GDP Growth
Economic Indicator
Gross Domestic Product (GDP) Annualized
Released quarterly by the US Bureau of Economic Analysis, the GDP Annualized measures the value of final goods and services produced in the United States. This figure is a key indicator of the nation’s economic health and is expressed as an annualized rate. Higher GDP readings generally support the USD, while lower readings weaken it.
Next release: Thu Jan 30, 2025 13:30 (Prel)
Frequency: Quarterly
Consensus: 2.6%
Previous: 3.1%
Keep an eye on the upcoming GDP figures for valuable insights into the health of the US economy and their potential impact on the USD.
Stay informed and engaged for more updates and analysis on economic indicators and currency movements. Join the discussion in the comments below or subscribe to our newsletter for regular updates on these critical financial topics.
We appreciate your continued support and engagement. Feel free to share this article on your social media platforms and stay tuned for more insightful content.
Thank you for reading!
Join the conversation and share your thoughts below!