If economists are professionals who are paid to make incorrect guesses, as the old joke goes, then they’re certainly earning their keep. 

On Thursday, the Commerce Department said the US economy grew 2.3% in the fourth quarter. Economists surveyed by FactSet expected 2.4% and those polled by Bloomberg 2.6%. So the punchline works — but, while the numbers came up short of estimates, there’s a story of resilience in the details.

Consume or Be Consumed

The US economy expanded 2.8% through all of 2024, the Commerce Department said, on par with the 2.9% in 2023. While that is a slight year-over-year tick down, 2024 marked the second year in a row that the economy defied gloomy prognostications including a few downbeat predictions from Wall Street.

And the fourth-quarter data released Thursday was a tribute to the unshakable resilience of the American consumer, whose outlays made up for a decline in business investment:

• Consumer spending grew 4.2% in the quarter, the fastest since the first quarter of 2023 and a half percentage point more than the 3.7% pace in the third quarter. Labor Department data released Thursday showed unemployment claims falling more than expected, another encouraging sign.
• Meanwhile, the 4.1% savings rate in the fourth quarter, while down from 4.3% in the third quarter, remained relatively high — the small decline suggests consumers dipped into their savings for purchases while remaining well capitalized. And the growth rate of household disposable income after taxes and inflation rose to 2.8% in the fourth quarter from 1.1% in the third quarter — this was the result of higher wage gains, meaning consumers had more to spend.

The main drag on growth in the fourth quarter was businesses investing less on new buildings and equipment, though one major factor — the seven-week labor stoppage at Boeing — is now over. Equipment spending contracted 7.8% in the fourth quarter — and investment in aircraft declined 69%. Despite Boeing’s propensity for bad news days, it’s not likely to go into near shutdown again.

Put Your Feet Up: With the consumer price index — aka inflation — rising for two consecutive months and the abovementioned strength in the labor market — a potential contributing factor to inflation — and possible forthcoming tariffs on imported goods — aka another potential inflation factor — it’s hard to knock the Federal Reserve’s decision to leave interest rates untouched this week.

One is selling the present, the other is selling the future — an arguably really, really far-flung version of the future.

On Thursday, Toyota announced it had sold 10.8 million cars in 2024, locking in its status as the world’s top carmaker for the fifth straight year — all while battery electric vehicles account for less than 2% of its total sales. Tesla, meanwhile, came in under expectations in its earnings report on Wednesday and didn’t seem to want to talk about electric vehicles at all. Or, at least, not the type that us regular ol’ humans can drive.

King of the World

Toyota won 2024 in part by leaning into the high demand for hybrid vehicles in the US and Europe, selling 4.2 million of the vehicle type (for reference, Tesla sold just under 1.8 million cars overall last year). In other words: Toyota is meeting the market where it is.

Tesla, too, spent the year trying to geolocate the market — and begrudgingly shifted to affordability. The company pointed to a drop in average sales price to explain in large part why its net income fell 71% in the fourth quarter and 53% for the year. Overall, revenue from its core automotive business fell 8% year-over-year in the final quarter.

So what explains Tesla’s roughly $1.1 trillion market cap lead over Toyota? Tesla’s positioning as a post-combustion engine automaker certainly helps (though BYD outsold it by more than 2:1 last year). And now the company is portraying itself as a winner of the post-human future too — spending considerable time Wednesday hyping its promised robotaxi and humanoid robot products.

And, of course, a bet on Tesla is a bet on CEO Elon Musk as galactic ruler with an office in the White House, though none of that seems to be especially helpful at the moment: 

• Roughly 30% of Tesla’s $2.3 billion profit in the quarter could be attributed to regulatory credits, which Trump 2.0 says could soon go bye-bye (paper gains on bitcoin holdings accounted for another $600 million of its profit). Meanwhile, as much as 25% of the parts used in its US-made cars come from Mexico, which could soon be subjected to tariffs as high as 25%.
• On the other hand, Musk’s political power could help Tesla secure key regulatory exceptions for its promised line of robotaxis — especially for its Cybercab, which features no steering wheel or gas or brake pedals. Musk has called for a national approval process for self-driving cars, instead of the current state-by-state framework.

Epic Flail: Investors are buying the hype: Tesla’s share price rose 3.5% Thursday, after a 5% climb after-hours Wednesday. Which prompted considerable confusion from JPMorgan analysts, who wrote in a note to investors they were “not clear why” the jump happened, though they said it may be “related to management guidance for 2026 (no financial targets were provided, but it was said to be ‘epic’) and for 2027 and 2028 (‘ridiculously good’).” We’re sensing some sarcasm.

The commercial property market has resembled a subplot in a Michael Bay disaster movie, but has the next act begun? 

Blackstone sure seems to think so. “Office [real estate] has bottomed, particularly in stronger markets and better-quality buildings,” Blackstone President Jon Gray said in an interview with Bloomberg on Thursday, ahead of both the company’s earnings call as well as a possible major real estate deal.

Skyscraping By

As it turns out, rock bottom may actually be behind us. According to a report published by broker Colliers International Group earlier this month, the office space vacancy rate in New York City at the end of 2024 was around 16.5%. That’s about double from pre-pandemic norms but marks the lowest point from September 2022’s peak. 

Valuations, meanwhile, are down as much as 70% from their pre-covid peak — which is why Gray said he expects a rebound, and likely why Blackstone is seizing the opportunity to get back into the market:

• The firm is nearing a deal to acquire 1345 Avenue of the Americas in Midtown, sources told Bloomberg. The building is 50 stories tall, spanning 1.9 million square feet.
• While details of the building’s price are not clear, S&P Global in November appraised the value of the loans secured against the building at $896 million. That’s down from $1.2 billion when the loans were first issued, though rent per square foot for top NYC buildings is now above pre-pandemic levels, according to real estate services firm Savills.

Sign of the Times: If completed, the deal would mark Blackstone’s first New York office building transaction in nearly three years. The office sector was once core to its real estate business — accounting for over 50% of its property holdings way back before the 2008 financial crisis. These days, office space accounts for roughly 2% of its portfolio, with warehouses, apartments, and data centers making up the bulk of its holdings.