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Another successful year for the US economy

During the last quarter of 2024, the US economy grew at an annual rate of 2.3%, according to the Bureau of Economic Analysis. This expansion was below the expected 2.6% and represented a slowdown from the 3.1% increase seen in the previous quarter.

Main Factors Contributing to Economic Expansion

Growth in the fourth quarter was mainly fueled by a rise in consumer spending and government outlays. As a major factor of the Gross Domestic Product (GDP), consumer spending stayed strong, indicating continued household consumption. Government outlays also played a positive role, with significant boosts in federal and state spending.

Quarterly Comparison Analysis

The growth rate of 2.3% in the fourth quarter marks the most sluggish quarterly expansion since 2018, when the economy saw a 0.6% increase in the final quarter. Annually, the economy expanded by 2.8% in 2024, slightly under the 2.9% growth achieved in 2023.

Elements Leading to the Deceleration

Factors Contributing to the Slowdown

  • Reducción de Inversiones: Hubo una caída en las actividades de inversión, lo que compensó en parte las ganancias del gasto de los consumidores y del gobierno.
  • Dinámicas Comerciales: Las importaciones disminuyeron en este período, lo cual, aunque resta en el cálculo del PIB, sugiere cambios potenciales en la demanda interna y ajustes en la cadena de suministro global.

Presiones Inflacionarias e Implicaciones Políticas

La inflación persistente sigue siendo motivo de preocupación, con el Índice de Precios al Consumidor (IPC) subiendo a 2.9% en diciembre de 2024. Este aumento en la inflación ha llevado a los economistas a modificar sus pronósticos, esperando que las presiones sobre los precios continúen el próximo año. La Reserva Federal se enfrenta al desafío de equilibrar los esfuerzos para controlar la inflación sin frenar el crecimiento económico.

Summary of the Labor Market

In spite of prior worries, the labor market showed strength, with the unemployment rate dropping to 4.1% in December 2024. Nonetheless, forecasts indicate a minor rise in unemployment by the close of 2025, signifying potential changes in the labor market as the economy faces continuous challenges.

Despite earlier concerns, the labor market demonstrated resilience, with the unemployment rate declining to 4.1% in December 2024. However, projections suggest a slight increase in unemployment by the end of 2025, reflecting potential adjustments in the labor market as the economy navigates ongoing challenges.

Outlook for 2025

Looking ahead, the economic outlook for 2025 presents a mixed picture:

  • Growth Projections: The Congressional Budget Office (CBO) projects a moderation in economic growth, with GDP expected to increase by 1.9% in 2025, down from an estimated 2.3% in 2024.
  • cbo.gov
  • Inflation Expectations: Economists anticipate that inflation will remain above the Federal Reserve’s 2% target, influenced by factors such as ongoing supply chain disruptions and policy decisions.
  • reuters.com
  • Policy Considerations: Proposed tariffs and stricter immigration policies could exert additional inflationary pressures and impact labor market dynamics, necessitating careful monitoring and policy adjustments. 
By Roger W. Watson