WASHINGTON — As 2024 drew to a close, the U.S. economy experienced a robust growth rate of 2.4% annually, spurred in part by a surge in consumer spending at the year’s end, according to government data released Thursday. This figure marks a slight upward revision from the earlier estimates of fourth-quarter growth.
Despite the encouraging performance, questions loom about the economy’s ability to maintain such momentum. Concerns about President Donald Trump’s aggressive trade policies, workforce reductions in federal sectors, and rigorous immigration enforcement cast doubt on future economic stability.
The nation’s gross domestic product (GDP), which quantifies the total value of goods and services produced, showed a reduction from a 3.1% growth rate in the preceding July-September quarter. For the entirety of 2024, GDP expanded by 2.8%, a slight decrease from the 2.9% growth recorded in 2023.
A key driver for the fourth quarter was consumer spending, increasing at a 4% rate compared to 3.7% in the third quarter of 2024. However, the same period saw a decline in business investment, with equipment investments falling significantly by 8.7%.
Additionally, a reduction in business inventories subtracted 0.84 percentage points from GDP growth in the fourth quarter. Within the GDP data, a segment that reflects the economy’s core strength grew at an annual pace of 2.9% in the fourth quarter. This was a downtick from a previous estimate of 3.2% and a 3.4% figure in the third quarter. This category tracks consumer spending and private investment while excluding volatile items such as exports, inventories, and government expenditure.
Inflationary pressures remained evident at the end of 2024, illustrated by the Federal Reserve’s preferred measure, the personal consumption expenditures (PCE) price index. It surged at an annual rate of 2.4%, exceeding the Fed’s 2% target and rising from 1.5% in the third quarter. When excluding erratic food and energy prices, core PCE inflation rose to 2.6% from 2.2% in the third quarter.
The report issued Thursday was the final government review of the fourth-quarter GDP.
Looking ahead, the economic outlook becomes murkier. Trump’s recent imposition of various import taxes, including a 25% levy on foreign automobiles announced this past Wednesday, risks escalating inflation and impeding investment, which could retard growth.
The fourth quarter results depicted the U.S. economy prior to the onset of heightened policy uncertainty associated with trade, noted Ryan Sweet, chief U.S. economist at Oxford Economics. The interplay of policy unpredictability, tariffs, and tighter financial conditions is exerting pressure on early 2025 growth, he indicated.
Consumer confidence in the U.S. is witnessing a sharp decline due to apprehensions about tariffs and inflation. This is prompting major retailers to curb their future expectations, reporting that consumers have begun to restrain their spending.