The American economy showed resilience as it closed out 2024 with a growth rate of 2.3% in the fourth quarter, contributing to an annual growth rate of 2.8%. This was reported by the Commerce Department and marks a slight decline from the 2.9% growth observed in 2023.

Consumer spending played a central role in this economic performance, rising at a 4.2% pace, the highest since early 2023, and an increase from 3.7% in the previous quarter. Despite robust consumer activity, the data also indicated a significant decrease in business investments, especially in equipment, which fell sharply after two strong quarters. Reuters discussed how business inventories also declined, reducing growth by 0.93 percentage points.

As inflation remains a concern, the Federal Reserve’s preferred inflation index, the Personal Consumption Expenditures (PCE) index, rose to 2.3% in the fourth quarter, up from 1.5% in the previous quarter. The core PCE inflation, which excludes food and energy, increased to 2.5%, compared to 2.2% in the third quarter. Many economists, including Matthew Martin from Oxford Economics, attribute the robust spending to consumer fears of possible price hikes from tariffs threatened by the new Trump administration. This concern has led families to make larger purchases in anticipation of future costs Source.

The slow growth anticipated by some analysts could pose challenges for the Federal Reserve as it evaluates interest rates in light of ongoing inflationary pressures. Fed Chair Jerome Powell emphasized that there is no need for haste in adjusting rates. This shows a cautious approach to ensure a balance between economic growth and inflation control.

Overall, with President Trump set to take office, the focus on tax policies and regulatory changes may further shape the economic landscape in 2025. The implications of tariffs and immigration policies remain particularly uncertain but could pose obstacles to sustained growth as highlighted by various economic analyses.

The fourth-quarter GDP estimate, part of three projections by the Commerce Department, signifies an ongoing recovery effort, even amidst European economic stagnation. The European Central Bank's recent rate cuts further illustrate this disparity in economic health as the U.S. audience braces for future shifts in policy and economic outlook AP News.

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