US GDP expected to confirm solid economic growth in Q4 despite easing from previous quarter

• The United States Gross Domestic Product is expected to grow at an annualised rate of 2.8% in Q4 2024.
• The US economy is expected to keep growing at a healthy pace.
• The US Dollar is in recovery mode amid ruling risk aversion. 

The United States (US) Bureau of Economic Analysis (BEA) is scheduled to release the preliminary estimate of the US Gross Domestic Product (GDP) for the October-December quarter on Thursday. Analysts anticipate that the report will indicate an annualised economic growth rate of 2.8%, slightly below the 3.1% posted in the third quarter of the year.

What to expect from GDP figures this time

The BEA's preliminary GDP release is the most important for financial markets, as the figure is the ultimate indicator of US economic health. Alongside growth data, the report includes fresh Personal Consumption Expenditures (PCE) - Price Index figures, the Federal Reserve's (Fed) favourite inflation gauge. 

The current release is a bit tricky, as the Fed announced its monetary policy decision to keep interest rates on hold ahead of GDP and PCE updates, and financial markets are still digesting the latest on that front. 

Back in December, the Fed published its latest Summary of Economic Projections (SEP) or dot plot, which showed upward revisions in 2025 year-end growth to 2.1% from 2% and to core inflation to 2.5% from 2.1%. Generally speaking, the latest SEP suggested policymakers expected continued economic expansion and inflation to remain above their 2% goal for some more time.

Beyond the headline GDP reading, market participants anticipate the Q4 core PCE Price Index will print at 2.5%, higher than the 2.2% posted in Q3. 

Other than that, the report includes the GDP Price Index, which tracks changes in the prices of goods and services produced domestically, including exports but excluding imports. This index provides a clear view of how inflation is affecting GDP. For the fourth quarter, the GDP Price Index is expected to increase by 2.5%, up from the 1.9% rise seen in the third quarter.

It is worth adding that the GDPNow model from the Federal Reserve Bank of Atlanta estimates real GDP growth in the fourth quarter of 2024 is 3.2% on Tuesday, up from 3.0% on January 17.

When will the GDP print be released and how can it affect the USD?

The US GDP report will be published at 13:30 GMT on Wednesday. In addition to the headline real GDP figure, changes in private domestic purchases, the GDP Price Index and the Q4 PCE Price Index figures could impact the US Dollar's (USD) valuation.

A better-than-anticipated GDP headline could support the Fed's dovish case and pressure the USD while discouraging figures could have the opposite effect on the American currency. 

Valeria Bednarik, FXStreet Chief Analyst, says: "The US Dollar Index (DXY) recovered amid a risk-averse environment at the beginning of the week but stands far below the monthly high posted in mid-January at 110.18. At the same time, the ongoing advance lacks momentum, according to technical readings in the daily chart. The January 23 intraday high at 108.50 comes as an immediate barrier ahead of the 109.00 figure. Should the index surpass the latter, market players will be looking at the 109.40-109.50 region as a potential bullish target."

Bednarik adds: "A decline below 107.75, the January 29 intraday low, exposes the monthly bottom at 106.97. Still, and given the risk-averse environment, US Dollar dips could be seen as buying opportunities, with additional falls unlikely in the near term."