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The US economy just had another robust year

During the last quarter of 2024, the US economy grew at an annual rate of 2.3%, according to the Bureau of Economic Analysis. This expansion was below the expected 2.6% and represented a slowdown from the 3.1% increase seen in the previous quarter.

Primary Factors of Economic Expansion

Growth in the fourth quarter was mainly fueled by a rise in consumer spending and government outlays. As a major factor of the Gross Domestic Product (GDP), consumer spending stayed strong, indicating continued household consumption. Government outlays also played a positive role, with significant boosts in federal and state spending.

The fourth-quarter growth was primarily driven by increases in consumer spending and government expenditures. Consumer spending, a significant component of the Gross Domestic Product (GDP), remained robust, reflecting sustained household consumption. Government spending also contributed positively, with notable increases in both federal and state expenditures.

The growth rate of 2.3% in the fourth quarter marks the most sluggish quarterly expansion since 2018, when the economy saw a 0.6% increase in the final quarter. Annually, the economy expanded by 2.8% in 2024, slightly under the 2.9% growth achieved in 2023.

The 2.3% growth rate in Q4 represents the slowest quarterly expansion since 2018, when the economy grew by 0.6% in the fourth quarter. On an annual basis, the economy grew by 2.8% in 2024, slightly below the 2.9% growth recorded in 2023.

Numerous factors played a role in the tempered growth seen in the fourth quarter:

Several elements contributed to the moderated growth in the fourth quarter:

Inflation Pressures and Policy Consequences

Ongoing inflation continues to be worrisome, as the Consumer Price Index (CPI) increased to 2.9% in December 2024. This rise in inflation has prompted economists to revise their projections, expecting sustained price pressures over the next year. The Federal Reserve is tasked with the challenge of managing inflation control measures while avoiding hindrances to economic growth.

Persistent inflation remains a concern, with the Consumer Price Index (CPI) rising to 2.9% in December 2024. This uptick in inflation has led economists to adjust their forecasts, anticipating continued price pressures in the coming year. The Federal Reserve faces the challenge of balancing efforts to control inflation without stifling economic growth.

Labor Market Overview

Perspectivas para 2025

Mirando al futuro, las perspectivas económicas para 2025 muestran un panorama mixto:

Looking ahead, the economic outlook for 2025 presents a mixed picture:

  • Growth Projections: The Congressional Budget Office (CBO) projects a moderation in economic growth, with GDP expected to increase by 1.9% in 2025, down from an estimated 2.3% in 2024.
  • cbo.gov
  • Inflation Expectations: Economists anticipate that inflation will remain above the Federal Reserve’s 2% target, influenced by factors such as ongoing supply chain disruptions and policy decisions.
  • reuters.com
  • Policy Considerations: Proposed tariffs and stricter immigration policies could exert additional inflationary pressures and impact labor market dynamics, necessitating careful monitoring and policy adjustments. 
By Roger W. Watson

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