US Economy Grows 2.4% in Q4 2024, but Inflation Concerns Loom
Strong Consumer Spending Amid Economic Challenges
The US economy expanded at a healthy annual rate of 2.4% in the last quarter of 2024, according to a government growth estimate revision. This growth was driven by robust consumer spending, despite obstacles such as slower business investment and declining inventories.
- GDP growth decreased from 3.1% in Q3 to 2.4% in Q4
- Overall 2024 economic growth was 2.8%, slightly lower than 2.9% in 2023
- Consumer spending grew at a 4% pace in Q4, up from 3.7% in Q3
- Business investment fell, with an 8.7% drop in equipment investment
- Declining business inventories reduced GDP growth by 0.84 percentage points
Underlying Economic Strength and Inflationary Pressures
A key measure of the economy’s underlying strength, excluding volatile components, showed a 2.9% annual growth rate in Q4. However, inflationary pressures continued to rise, with the Federal Reserve’s preferred inflation gauge, the PCE price index, increasing to 2.4%. Core PCE inflation, excluding food and energy prices, reached 2.6%.
Uncertain Outlook for 2025
Despite the strong finish in 2024, the outlook for 2025 remains uncertain, particularly due to President Donald Trump’s trade policies. New tariffs, including a 25% tax on imported cars, could lead to higher inflation and disrupt business investment, threatening future growth.
- Policy uncertainty and trade tensions escalated under Trump’s administration
- Tariffs and tightening financial market conditions are weighing on growth
- US consumer confidence has dropped, driven by inflation fears and tariff impacts
- Major retailers have adjusted their expectations for 2025
