Economists used to swear by their cloudy forecasts, but American consumers have kept them on their toes by keeping their wallets open and the economy humming. The US economy expanded at a 2.3% annualized rate in Q4 2024, capping off another year of strength in the face of pessimistic forecasts. Consumer spending surged 4.2% in Q4, marking the first time since late 2021 that spending exceeded 3% in consecutive quarters, driven by robust vehicle sales and resilient household finances.

• Government expenditures continued their upward trajectory, rising 2.5%, while the housing sector finally showed signs of life after two consecutive quarters of decline.
• The economy grew 2.8% for the full year 2024, only slightly below 2023’s 2.9% expansion, showcasing remarkable resilience despite elevated interest rates and persistent inflation.

Looking ahead with caution: Federal Reserve Chair Jerome Powell’s recent stance suggests a measured approach to future rate cuts, emphasizing that “we do not need to be in a hurry to adjust our policy stance.” Additionally, Trump’s proposed policies like tariffs and immigration restrictions could hamper growth and fuel inflation — a concerning prospect given that core PCE inflation ticked up to 2.5% in Q4. However, Paul Ashworth from Capital Economics argues that the GDP figure “suggests the economy remains strong, particularly given the fourth-quarter disruptions,” which included a strike at Boeing and the aftermath of two hurricanes.