The American Economy's Solid Finish in 2024
The US economy ended 2024 with a robust performance, buoyed by robust consumer spending that fueled growth. The Commerce Department reported that gross domestic product (GDP) expanded at a 2.3% annual rate in Q4, slightly below the 2.4% predicted by economists.
Consumer spending accelerated to a 4.2% growth rate, the fastest since early 2023, while business investment declined due to a contraction in equipment spending.
Inflation remained a concern in Q4, as the Federal Reserve's preferred measure, the personal consumption expenditures (PCE) index, rose 2.3% annually, up from 1.5% in Q3. Core PCE inflation, excluding food and energy, also increased to 2.5% from 2.2% in the previous quarter.
Despite slowing to 3.2% in Q4 from 3.4% in Q3, a key measure of underlying economic strength, which includes consumer spending and private investment, remained robust.
The current administration inherited a healthy economy with steady growth and low unemployment of 4.1% in December. The Federal Reserve kept interest rates unchanged, emphasizing that further cuts were not immediately necessary.
However, the economic outlook has become somewhat uncertain. While the administration's plans for tax cuts and deregulation could boost GDP growth, the potential impact of import tariffs and immigration restrictions remains unclear.