The US economy expanded at a solid pace at the end of 2024, fueled by a generous tailwind from consumer spending that more than offset drags from a strike at Boeing Co. and much leaner inventory investment.
Inflation-adjusted gross domestic product increased an annualized 2.3% in the fourth quarter after rising 3.1% in the prior three-month period, according to the government's initial estimate published Thursday. The median forecast in a Bloomberg survey of economists called for a 2.6% growth.
Consumer spending, which comprises the largest share of economic activity, advanced at a 4.2% pace — the first time since late 2021 that outlays have exceeded 3% in consecutive quarters. The acceleration was led by a pickup in motor vehicle sales.
At the same time, a closely watched measure of underlying inflation rose 2.5%, marking only the second quarterly acceleration since late 2022, the Bureau of Economic Analysis data showed. December inflation and spending figures are due Friday.
US stock index futures remained higher while Treasuries pared gains and the dollar was little changed.
The GDP figures cap another solid year for the world's largest economy that defied expectations for a marked slowdown as consumers hung tough in the face of persistent inflation and high borrowing costs. That helps explain why the Federal Reserve is taking a more measured approach to future interest-rate cuts.
Chair Jerome Powell, speaking after
He also said the economy is strong, which was further corroborated by the GDP report. A measure of underlying growth trends favored by economists that includes consumer spending and business investment, known as final sales to private domestic purchasers, advanced at a robust 3.2% pace.
The economy grew 2.8% in 2024 after expanding 2.9% and 2.5% in the prior two years, respectively.
Category Breakdown
Nonresidential fixed investment declined an annualized 2.2%, the first decline in more than three years. Business spending on equipment decreased an annualized 7.8%, reflecting the impact of a machine workers' strike at aircraft maker Boeing. Outlays for structures declined for a second straight quarter.
Residential investment added to growth for the first time in three quarters.
Government spending rose an annualized 2.5% following a strong third- quarter advance that was led by defense expenditures. Growth in federal spending is at risk as President Donald Trump's agenda takes aim at programs he's pledged to eliminate.
Other parts of the economy's fourth-quarter report card didn't score as well. Inventories were the largest drag, subtracting nearly a full percentage point from growth — the most since early 2023.
The outlook for the economy this year is one of more moderate growth. The latest Bloomberg month survey shows GDP growth will cool to 2.2% on average, with economists anticipating only a few Fed interest-rate cuts. At the same time, the roll-out of Trump policies add an element of uncertainty.
Trump is looking to deploy tariffs — perhaps as soon as this Saturday — in order to spur investment in manufacturing and encourage domestic production, which he says will help bring factory jobs home and reduce the trade deficit.
However, his first-term tariffs led to a drop in factory employment and industrial production contracted, amounting to a drag on growth that concerned Fed officials at the time, according to newly released transcripts of 2019 policy meetings.
The threat of tariffs has the rest of the world concerned as they come at a time when major economies are struggling. The US economy continues to outperform its global peers largely due to a strong labor market, marked by wages rising faster than prices and low unemployment. That's helped to sustain consumer spending and broader economic activity.
Other figures Thursday showed applications for US unemployment benefits dropped by the most in six weeks, according to Labor Department data released Thursday. Continuing claims fell from a three-year high.
