The U.S. economy closed out 2024 with strong momentum at 2.8 percent growth, driven by robust consumer spending.
Why It Matters
With President Donald Trump's return to the White House, the country could be poised for a major economic shift as his administration prepares to implement new policies that may redefine trade, taxation, and regulatory frameworks.
What To Know
The Commerce Department reported Thursday that the U.S. economy grew at a 2.3 percent annual rate in the fourth quarter, driven by strong consumer spending. The steady expansion underscores economic resilience heading into 2025, even as a new Trump administration prepares to reshape fiscal and trade policies.
For 2024, the U.S. economy posted a solid 2.8 percent growth, slightly below the 2.9 percent recorded in 2023.
Will Growth Continue?
Fourth-quarter expansion came in at 2.3 percent, just shy of the 2.4 percent forecast by economists in a FactSet survey. The data highlights steady economic momentum as the Trump administration prepares to implement its policy agenda.
Consumer spending surged at a 4.2 percent annual pace in the fourth quarter, the fastest since early 2023, up from 3.7 percent in the previous quarter. However, business investment declined sharply, with equipment spending plunging after two consecutive strong quarters. The contrast highlights a resilient consumer sector but signals potential headwinds for corporate growth as the Trump administration prepares to reshape economic policy.
Is Inflation Still a Problem?
The latest economic report also revealed lingering inflationary pressures at the end of 2024. The Federal Reserve's preferred inflation measure, the personal consumption expenditures (PCE) index, rose at a 2.3 percent annual rate in the fourth quarter, up from 1.5 percent in the previous quarter and exceeding the Fed's 2 percent target.
Core PCE inflation, which excludes volatile food and energy prices, climbed to 2.5 percent, up from 2.2 percent in the third quarter. The uptick signals potential challenges for the Fed as it weighs future interest rate decisions amid a shifting economic landscape under the Trump administration.
A decline in business inventories trimmed 0.93 percentage points from fourth-quarter GDP growth.
However, a key measure of the economy's underlying strength—which factors in consumer spending and private investment while excluding volatile components including exports, inventories, and government spending—grew at a solid 3.2 percent annual rate. While slightly down from 3.4 percent in the third quarter, the data suggests sustained economic momentum as the Trump administration prepares to implement its policy agenda.
What People Are Saying
Paul Ashworth, chief North America economist at Capital Economics, said that figure "suggests the economy remains strong, particularly given the fourth-quarter disruptions,'' including a strike at Boeing and the aftermath of two hurricanes.
Fed Chair Jerome Powell told reporters his present approach to interest rates, "we do not need to be in a hurry'' to make more cuts.
What Happens Next
Thursday's GDP release was the first of three Commerce Department estimates of October-December growth.
This article includes reporting from The Associated Press
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