Final government figures indicate that the US economy ended 2024 stronger than expected, with Real Gross Domestic Product (GDP) growing at a 2.4% annualized rate in Q4, revised from 2.3%, due to robust consumer activity.
This growth was driven by a notable 4% rise in consumer spending during the holiday season and increased government expenditures, although inflation remained high.
Additionally, the Personal Consumption Expenditures (PCE) price index, which the Federal Reserve monitors, increased at an annual rate of 2.4%, surpassing the Fed’s 2% target.
Solid Growth in 2024 but Declining Business Investment
For the whole of 2024, the economy expanded by 2.8%, a slight decline from the 2.9% growth in 2023. Despite this growth, business investment fell, with corporate spending on equipment dropping significantly by 8.7% in Q4, indicating caution among businesses regarding large capital expenditures towards the end of the year.
2025 Outlook: Uncertainties from Trump’s Policies
Looking ahead, maintaining this growth may be challenging due to uncertainties linked to Donald Trump’s policies, including trade wars, federal workforce reductions, and proposed widespread immigrant deportations. Tariffs could heighten inflation and disrupt investment strategies, presenting a complex economic landscape. However, according to Arthur Hayes, these tariffs may not affect crypto investors significantly.
Inflation, Fed Decisions, and Trade Policy’s Role in 2025
While the late 2024 performance is promising, various factors since then could influence the US economy. Trade policies could have major domestic and global repercussions, especially if tariffs provoke retaliatory actions that slow growth.
Additionally, geopolitical tensions or supply chain disruptions might raise costs and threaten economic stability.
In summary, while the US economy performed exceptionally in late 2024, uncertainties loom for 2025. Inflation trends, Federal Reserve actions, and trade policies will significantly influence the economic outlook. If inflation declines, we might anticipate rate cuts that could stimulate growth. Conversely, rising trade tensions or sustained high borrowing costs could indicate a potential slowdown.
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