The U.S. economy grew at a solid annual rate of 2.4% in the final quarter of 2024, driven by a strong increase in consumer spending, according to an updated report from the government on Thursday. However, it’s uncertain whether the U.S. can maintain robust growth amid ongoing trade wars initiated by President Donald Trump, reductions in the federal workforce, and his promise to deport immigrants working in the country illegally.
The Commerce Department reported that the economy’s growth slowed from 3.1% in the third quarter of 2024. For the entire year of 2024, the U.S. economy expanded by 2.8%, a slight decrease from 2.9% in 2023. Consumer spending grew at a rate of 4%, up from 3.7% in the third quarter of 2023. However, business investment decreased, with a notable 8.7% decline in equipment investment.
A decline in business inventories reduced fourth-quarter GDP growth by 0.84 percentage points. A key measure of the economy’s core strength grew at a solid 2.9% annual rate in the fourth quarter, slightly revised down from the previous estimate of 3.2% and a decrease from 3.4% in the third quarter. This measure includes consumer spending and private investment, but excludes more volatile factors like exports, inventories, and government spending.
Wednesday’s report highlighted ongoing inflationary pressures at the close of 2024. The Federal Reserve’s preferred inflation measure, the personal consumption expenditures (PCE) price index, increased at an annual rate of 2.4%, up from 1.5% in the third quarter, and above the Fed’s target of 2%. Excluding volatile food and energy prices, the core PCE inflation rate was 2.6%, up from 2.2% in the third quarter.
Thursday’s report provided the government’s final estimate of fourth-quarter GDP. Looking ahead, the economic outlook is uncertain. President Trump’s decision to impose tariffs on various imports, including a 25% tariff on foreign autos announced Wednesday, could raise inflation and disrupt investment, potentially slowing down growth.
