Development slowed however remained resilient on the finish of 2024, leaving the U.S. financial system on strong footing heading into a brand new yr — and a brand new presidential administration — that is stuffed with uncertainty.
U.S. gross home product, adjusted for inflation, grew at a 2.3 p.c annual charge within the fourth quarter of final yr, the Commerce Division reported on Thursday. That was down from the three.1 p.c progress charge within the third quarter however nonetheless represented an encouraging finish to a yr through which the financial system as soon as once more defied expectations.
The figures are preliminary and shall be revised at the very least twice as extra full information turns into obtainable.
For the yr as an entire, measured from the top of 2023 to the top of 2024, G.D.P. elevated 2.5 p.c, far forward of forecasters’ expectations when the yr started. Strong client spending, underpinned by low unemployment and regular wage progress, helped preserve the financial system on observe regardless of excessive rates of interest, cussed inflation and political turmoil at house and overseas.
“We ended on a fairly robust notice,” stated Diane Swonk, chief economist for the accounting agency KPMG. “It’s gorgeous how resilient and powerful the financial system has been.”
However the financial system entered the brand new yr going through a brand new set of challenges. The whirlwind begin to President Trump’s second time period — together with sweeping adjustments to immigration coverage, a spending freeze that was introduced after which rescinded, and steep tariffs that would start to take impact as early as this weekend — has elevated uncertainty for each households and companies. And whereas the complete scope of Mr. Trump’s plans stays unclear, economists warn that his proposals on commerce and immigration, particularly, may result in sooner inflation, slower progress, or each.
“You actually have all the precise components to help sustainable progress, however the query is, the place will or not it’s in 12 months’ time?” stated Gregory Daco, chief economist for the consulting agency EY-Parthenon. “The danger is you break the financial system.”
Nonetheless, the financial system entered 2025 with vital momentum, led by client spending, which grew at a 4.2 p.c annual charge within the fourth quarter, forward of forecasters’ expectations. Customers have been buoyed by a robust job market, which has allowed pay to rise sooner than costs in latest quarters: After-tax revenue, adjusted for inflation, elevated at a 2.8 p.c annual charge on the finish of final yr.
The housing market, too, confirmed indicators of life on the finish of the yr, as a drop in mortgage charges spurred building exercise. Residential funding, which incorporates new house constructing and renovation, rose after two straight quarterly declines.
However there are additionally pockets of weak spot. Companies invested much less in new buildings and gear within the fourth quarter, and exports fell. The rebound within the housing market might show short-lived: Mortgage charges have risen in latest months, and the marketplace for present properties stays frozen.
On the similar time, client costs rose extra rapidly on the finish of the yr, the most recent proof that progress on inflation has stalled. That has difficult the job going through policymakers on the Federal Reserve, who till lately had been anticipating to be chopping rates of interest with a purpose to shore up financial progress. As an alternative, the Consumed Wednesday held charges regular and signaled that the bar for future charge cuts shall be excessive.
Nonetheless, economists have warned for years for years that progress is at risk of faltering, solely to be proved unsuitable. And the momentum on the finish of 2024 ought to assist the financial system face up to no matter new threats emerge in 2025.
“We’ve been capable of take quite a bit and preserve going,” Ms. Swonk stated. “We will have a look at all of the fashions, however the fashions haven’t been that invaluable.”