Ending 2024 on a high note, the American economy showcased robust performance fueled by continuous consumer spending, setting the stage for potential shifts under the incoming Trump administration.
The Commerce Department reported a 2.3% annual growth rate in gross domestic product (GDP) for the fourth quarter,driven by robust consumer spending. For the entire year, the economy grew at a healthy 2.8%, surpassing the 2.9% growth recorded in 2023.
While this figure slightly trailed the 2.4% prediction of economists surveyed by FactSet, consumer spending remained a major driving force, expanding at a 4.2% pace— the fastest growth sence the first quarter of 2023.
Despite this positive momentum, business investment experienced a dip, particularly in equipment, which saw a sharp decline after consecutive strong quarters. Adding another layer to the economic landscape, Wednesday’s report highlighted persistent inflationary pressure throughout 2024.
The Federal Reserve’s preferred inflation gauge, known as the Personal Consumption Expenditures Price Index (PCE), indicated a 2.3% annual growth rate for the quarter, surpassing the Fed’s 2% target. Excluding volatile food and energy prices, core PCE inflation clocked in at 2.5%, marking a rise from 2.2% in the preceding quarter. Notably, a decrease in business inventories subtracted 0.93 percentage points from fourth-quarter growth.
However, a key metric reflecting the economy’s underlying strength— excluding volatile components like exports, inventories, and goverment spending— showed a solid 3.2% annual growth rate for the quarter. Despite a slight dip from 3.4% in the third quarter, this figure speaks volumes about the resilience of consumer spending and private investment.Paul Ashworth, Chief North America Economist at Capital Economics, noted, “suggests the economy remains strong, particularly given the fourth-quarter disruptions, “ citing events such as the boeing strike and hurricane aftermath.
President Trump inherited an economy marked by consistent growth and historically low unemployment rates— standing at 4.1% in December. The economy demonstrated remarkable resilience in the face of challenges, weathering 11 interest rate hikes implemented by the Federal Reserve in 2022 and 2023 to combat inflation.
Despite predictions of recession,GDP maintained a steady upward trajectory,surpassing 2% growth in nine of the previous ten quarters. Adding to this positive outlook, the Federal Reserve opted to hold its benchmark interest rate steady after three consecutive hikes, signaling cautious optimism regarding future economic performance.
The stage is now set for a possibly notable shift in direction under President Trump’s administration. His policies will undoubtedly shape the trajectory of this healthy economy,setting the tone for future growth,inflation,and employment trends.
The U.S.economy maintained a steady pace of growth at the end of last year, but the future outlook remains shrouded in uncertainty. The Commerce Department announced that GDP expanded at a modest rate during the October-December period, marking a slowdown from the robust growth seen in previous quarters. This figure, the first of three estimates from the Commerce Department, provides a snapshot of the economy’s performance but leaves open questions about its trajectory in the coming months.
While the Federal Reserve, led by Chair Jerome Powell, recently paused its interest rate cuts, citing stalled progress against inflation, other indicators point to a potential split in global economic performance. The European central Bank,as an example,took a different approach,cutting its benchmark rate by a quarter point. This action highlights the contrast between the U.S. economy’s resilience and the stagnation plaguing much of Europe, which recorded zero growth at the end of last year.
adding to the economic complexity, President Trump’s policies heighten the uncertainty surrounding the U.S. economic landscape. His plans to cut taxes and ease regulations,which economists believe could accelerate GDP growth,are balanced against concerns about his proposed tariffs on imports and mass deportation of undocumented immigrants. These measures could potentially dampen growth and contribute to higher prices for consumers.
Adding fuel to the fire, President Trump has publicly stated his desire to see lower oil prices and interest rates, even mentioning his intention to discuss these matters with Federal Reserve Chair Powell. Though, Powell dismissed these comments, asserting there has been no direct interaction between the two.
Further amplifying the sense of uncertainty, the Trump administration embarked on a series of actions aimed at reshaping the federal government. These included offering buyouts to federal workers and even issuing a controversial memo freezing federal grants. This memo was later reversed following widespread public outcry.
Commenting on the current economic climate, economist Ashworth stated, “We wouldn’t be surprised to see a reversal in the first quarter. As a starting point, we expect first-quarter GDP growth to slow marginally below 2%.”‘
What are the potential economic impacts of President Trump’s proposed tax cuts and deregulation measures?
Navigating Uncertainty: A Look at the U.S. Economy under President Trump
As President Trump takes office, the American economy finds itself at a crossroads. Recent reports indicate continued growth, yet the path forward remains unclear. Archyde News spoke with Dr. Emily Carter, Chief Economist at Global Insight, to delve deeper into thes complexities.
archyde News: Dr. Carter, the economy ended 2024 on a positive note, exceeding expectations. Can you elaborate on the key drivers behind this performance?
Dr. Carter: Certainly. Consumer spending remained robust throughout 2024,expanding at its fastest pace since early 2023. This fueled overall growth,despite a slight dip in business investment,particularly in equipment.
Archyde News: Inflation continues to be a concern. What impact could President Trump’s policies have on this front?
Dr. Carter: President Trump’s proposed tax cuts and deregulation measures could possibly stimulate economic growth, leading to increased demand and potentially higher inflation. conversely, his tariffs on imports could raise prices for consumers, further exacerbating inflationary pressures. It’s a complex equation, and the ultimate impact remains to be seen.
Archyde News: President Trump has publicly expressed his desire for lower oil prices. Could his administration’s actions influence energy markets?
Dr. Carter: while the President’s rhetoric may impact market sentiment, directly influencing oil prices is challenging.Global supply and demand dynamics play a crucial role, and geopolitical events can considerably sway energy markets.
Archyde News: Many economists believe President Trump’s policies could lead to economic growth, while others express concern about potential negative consequences. Where do you stand on this issue?
Dr. Carter: It’s too early to definitively say. President Trump’s policies represent a meaningful shift, and their long-term impact on the economy remains uncertain. Close monitoring and analysis will be essential to assess the true consequences.
Archyde News: Looking ahead, what advice would you give to individuals navigating this period of economic uncertainty?
Dr. Carter: Stay informed, diversify investments, and maintain a balanced budget.While economic volatility can be unsettling, prudent financial planning can help individuals weather storms and position themselves for future growth.
