The American economy ended 2024 on a strong note – but inflation pressure remains.
The Commerce Department reported Thursday that gross domestic product — the economy’s output of goods and services — expanded at 2.3 percent the annual rate from October through December.
The growth was slightly below the 2.4 percent that economists had predicted, according to FactSet. Despite the shortfall, however, the economy still grew a healthy 2.8 percent for the full year, compared to 2.9 percent in 2023.
Consumer spending grew at a 4.2 percent pace, the fastest since January-March 2023 and up from 3.7 percent in July-September last year.
Much of the spending growth was driven by Americans stocking up on big-ticket items to guard against possible price hikes from tariffs that the Trump administration has threatened. Spending on durable goods, such as cars, appliances, and furniture, rose by 12 percent in the fourth quarter.
“[President Donald] Trump’s talk of higher import taxes is already altering behavior by U.S. households,” said Joe Brusuelas, principal and chief economist for RSM US, said, per the Washington Post.
“They made those big purchases at the end of 2024, instead of 2025, to avoid possible price hikes.”
The figures are tempered slightly by evidence that businesses pulled back on investments and exported fewer goods overseas in the fourth quarter.
Wednesday’s report also showed persistent inflationary pressure at the end of the 2024. The Federal Reserve’s favored inflation gauge — called the personal consumption expenditures index, or PCE — rose at a 2.3 percent annual pace last quarter, up from 1.5 percent in the third quarter. Excluding volatile food and energy prices, so-called core PCE inflation was 2.5 percent, up from 2.2 percent in the July-September quarter.
Within the GDP data, a category that measures the economy’s underlying strength rose at a healthy 3.2 percent annual rate from July through September, slipping from 3.4 percent in the third quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.
President Donald Trump has inherited a healthy economy. Growth has been steady and unemployment low — 4.1 percent in December.
On Wednesday, the Fed left its benchmark interest rate unchanged after making three cuts since September. With the economy rolling along, Fed Chair Jerome Powell told reporters, “we do not need to be in a hurry” to make more cuts. The Fed is also cautious because progress against inflation has stalled in recent months after falling from four-decade highs hit in mid-2022.
The European Central Bank cut its benchmark rate by a quarter point Thursday, underlining the contrast between more robust growth in the U.S. economy and stagnation in Europe, which recorded zero growth at the end of last year.
The U.S. economic outlook has become more cloudy, however. Trump has promised to cut taxes and ease regulations on business, which could speed GDP growth. But his plan to impose big taxes on imports and to deport millions of immigrants working in the United States illegally could mean slower growth and higher prices.
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Additional reporting by AP.