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The Commerce Department reported Thursday that growth in gross domestic product — the nation's output of goods and services — decelerated from a 3.1% pace in July-September 2024.

For all of last year, the economy grew 2.8%, compared with 2.9% in 2023.

Consumer spending advanced at a 4.2% pace from October through December. Business investment fell in the fourth quarter, pushed lower by a 9% drop in equipment spending. A drop in business inventories shaved 0.81 percentage points off October-December growth.

But a category within the GDP data that measures the economy’s underlying strength rose at a healthy 3% annual rate from July through September, slipping from 3.4% in the third quarter and down slightly from the government's initial estimate. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.

Wednesday’s report also showed that inflationary pressure persists in the economy. The Federal Reserve’s favored inflation gauge — called the personal consumption expenditures index, or PCE — rose at a 2.4% annual pace last quarter, up from 1.5% in the third quarter and above the Fed’s 2% target. Excluding volatile and energy prices, so-called core PCE inflation was 2.7%, up from 2.2% in the July-September quarter. Both those inflation numbers were slightly higher than they’d been in the Commerce Department's initial report.

The report shows that Trump inherited a healthy economy when he took office last month. Growth has now topped a decent 2% for nine of the last 10 quarters. Unemployment is low at 4%, and inflation has come down from the highs it hit in mid-2022.

After lowering its benchmark interest rate three times in the last four months of 2024, the Federal Reserve left it unchanged in January and appears to be in no hurry to start cutting again. Progress against inflation has stalled in recent months.

President Donald Trump's plans to impose tax imports at a scale not seen since the 1930s risks raising prices and intensifying inflationary pressure. Deporting millions of immigrants working in the country illegally, as Trump has promised, could also create labor shortages that push up wages and feed inflation.

The Labor Department reported Thursday that the number of Americans filing for unemployment benefits . Some economists expect those numbers to tick higher as layoffs of federal workers ordered Elon Musk's Department of Government Efficiency start to show up in the data.

High Frequency Economics already expects January-March GDP growth to fall below 1%, lower if Trump goes ahead with plans to slap 25% taxes on goods from Canada and Mexico. On Thursday, Trump that early next week.

Thursday's GDP report was the second of three Commerce Department looks at fourth-quarter economic growth. The final estimate comes out March 27.