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 last quarter was mainly propelled by rises in consumer expenditures and government spending. Household consumption, a crucial part of the Gross Domestic Product (GDP), stayed strong, indicating ongoing consumer activity. Government expenses also played a positive role, with significant growth 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 2.3% growth in the fourth quarter marks the slowest quarterly increase since 2018, a time when the economy expanded by 0.6% in that same period. Annually, the economy grew by 2.8% in 2024, just under the 2.9% expansion noted 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.
Factors Contributing to the Slowdown
- Reduction in Investment: A downturn in investment activities partially counteracted the benefits from consumer and government expenditure.
- Trade Factors: Imports saw a decline in this time frame, which, though a negative in GDP calculation, suggests possible changes in local demand and global supply chain modifications.
- Investment Decline: There was a decrease in investment activities, which partially offset the gains from consumer and government spending.
- Trade Dynamics: Imports decreased during this period, which, while a subtraction in GDP calculation, indicates potential shifts in domestic demand and global supply chain adjustments.
Inflationary Pressures and Policy Implications
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.
A pesar de preocupaciones previas, el mercado laboral mostró resistencia, con la tasa de desempleo bajando a 4.1% en diciembre de 2024. No obstante, las proyecciones indican un leve aumento en el desempleo para finales de 2025, reflejando posibles ajustes en el mercado laboral mientras la economía enfrenta desafíos continuos.
Perspectivas para 2025
Outlook for 2025
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.
