The US economy wrapped up 2024 on a solid note, with consumer spending and government support playing key roles in driving growth, according to new data from the Commerce Department.
Despite some challenges, the economy grew by 2.3% in the fourth quarter, slightly below the 2.4% that economists had expected. For the full year, GDP grew by 2.8%, a strong performance, although slightly down from the 2.9% growth in 2023.
Consumer spending remains robust
Consumer spending rose by 4.2% in the final quarter of 2024, the fastest pace since early 2023. This growth was up from 3.7% in the previous quarter. The economy also benefitted from government spending and continued investment, although business investment slowed, particularly in equipment spending, which fell sharply after two strong quarters.
Matthew Martin, senior US economist at Oxford Economics, said, “Consumers have been the foundation of the economy, and they’ve been the biggest driver of resilient growth in 2024,” as quoted by the AFP news agency. He believes this growth will continue, supported by low layoffs, healthy job growth, and rising wages.
Inflation pressures persist
The report also showed ongoing inflation. The Federal Reserve’s preferred inflation measure, the personal consumption expenditures (PCE) index, rose by 2.3% in the fourth quarter, up from 1.5% in the third quarter. Core PCE, which excludes food and energy, increased by 2.5%, slightly up from 2.2% in the previous quarter.
Despite these inflation pressures, the economy remained strong. A key part of GDP, which excludes volatile items like exports and inventories, grew by 3.2% in the third quarter, down from 3.4% in the previous quarter.
Donald Trump inherits a healthy economy
President Donald Trump, who took office in January 2025, inherited a strong economy, with growth continuing despite high interest rates. Unemployment was 4.1% in December, and job gains stayed steady. The Federal Reserve kept its interest rate unchanged in December, after cutting it three times since September. Fed Chair Jerome Powell was quoted as saying to the Associated Press, “We do not need to be in a hurry to make more cuts,” due to the economy’s strength.
Global comparison
The US economy is growing strongly, while Europe is struggling, having seen zero growth at the end of last year. The European Central Bank recently lowered its benchmark rate due to weak performance. In the US, strong consumer spending, low unemployment, and rising wages have helped maintain growth, despite ongoing inflation concerns.
Trump has promised to cut taxes and reduce business regulations, but his plans on tariffs and immigration might slow growth and raise prices. KPMG’s chief economist, Diane Swonk, pointed out that the effects of these policies will take time. While some analysts expect growth to slow in 2025, they still believe the US economy will remain strong for now.
