The Commerce Department announced on Thursday that the United States economy grew at an annualized rate of 2.4% in the last quarter of 2024. This modest revision upholds the preliminary estimate of fourth-quarter growth, driven largely by a boost in consumer spending as the year concluded. The latest report is the government’s third and final assessment of GDP for the fourth quarter.
Gross domestic product (GDP), which quantifies the total production of goods and services, slowed from a 3.1% growth rate in the previous quarter, spanning July to September 2024. Over the entire course of 2024, the U.S. economy expanded by 2.8%, a slight dip from the 2.9% growth recorded in 2023.
Consumer spending demonstrated considerable vigor, increasing at a 4% rate compared to a 3.7% escalation in the third quarter of the previous year. However, this was offset by a decline in corporate investment, particularly an 8.7% reduction in equipment investment. Additionally, a decrease in business inventories detracted 0.84 percentage points from fourth-quarter GDP growth.
Wednesday’s analysis also highlighted ongoing inflationary trends at the end of 2024. The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, climbed at an annualized pace of 2.4%, up from 1.5% in the third quarter, breaching the Fed’s 2% target. Excluding the volatile sectors of food and energy, core PCE inflation rose to 2.6% compared to 2.2% in the preceding quarter.
Looking into 2025, U.S. consumer sentiment has continued its steep decline, with Americans’ confidence in their financial prospects reaching a 12-year low. This pessimism is largely attributed to escalating concerns over tariffs and inflation.
According to the Conference Board, the consumer confidence index decreased by 7.2 points in March to 92.9, marking its fourth consecutive monthly drop and the lowest level since January 2021. The outcome fell short of analysts’ predictions, who had anticipated a reading of 94.5 according to a FactSet survey. Moreover, expectations for income, business, and the job market diminished significantly, with the short-term outlook dropping 9.6 points to 65.2.
