But let's dig more into that economic data because investors are weighing that data with the release of the fourth quarter GDP. We also got December PCE. Remember, that's the Fed's preferred inflation gauge. Federal Reserve correspondent Jennifer Schonberger is joining me now. Um Jen, I want to dive right into that GDP number because that is this is um a reading where we already had gotten a reading and this is a significant downward, you know, versus what people were expecting for the fourth quarter.

It was significantly lower than what a lot of people were expecting, but it was very much dinged by the government shutdown. The Bureau of Economic analysis estimates that a full percentage point was shaved off of GDP as a result. So, perhaps it could have been 2.4%, which makes it look a little bit better. Yes, not that toward pace of 4.4% that we saw in the third quarter, but if we dig into the components there, government spending really tanked. So that also weighed on the number. Yes, consumption was a bit softer, that growing about 2.4%. Not too much of a surprise there because we knew those December retail sales numbers had also come in lower and disappointed a bit. Though, I want to draw attention to business investment because that really carried the day for the quarter. Uh that was rising 3.7% and the details show it was really coming from IT equipment, software and R&D. So it's really pointing to the AI boom.

And that I think is going to continue to boost the economy, continue to boost productivity, and hopefully, we could see some more job creation that could lead to spending. So I think that is something to keep an eye on in future quarters to come. Now, exports were down and imports were up and we did see yesterday that that deficit, the the federal trade deficit hit a record again, even though this administration is looking to have a deficit. So even with the tariffs, uh we are still importing uh a good amount here. But on the whole, not as bad on its face, I would say, for the GDP number once you dig into those numbers.

Um let's talk about inflation then. Um so we got the PCE here and the core PCE coming in at 3% for December um on a year-over-year basis. Um how what should we read into that number? What do we do with that number? What does the Fed do with that number?

Right. So it was sticky, right? Inflation at 3% is a full percentage point above the Fed's 2% target, but it was expected. I mean, Fed Chair J. Powell laid out in his press conference on January 28th that he did expect PCE on a core basis to clock in at 3%. So I don't think that the Fed is surprised with this, but it underscores their argument that, look, we did three rate cuts at the tail end of last year and inflation's still above our target. So we're content to hold here. So I think the Fed's going to be taking more signal this morning from the inflation data than they are on the GDP number. That said, we did have CPI out last week and both of these indexes, CPI and PCE are calculated a little bit differently. PCE is more heavily weighted towards healthcare, whereas CPI is more heavily weighted towards housing and we know that housing services has been coming down. So that was sort of helping the CPI number. We don't have that as much in this PCE number. But bottom line, inflation's still looking a bit sticky and I think this keeps the Fed on hold at this point.

That seems to be the view out there. Jennifer, thank you so much. Appreciate it.