The US economy grew at an annual rate of 2.3% in the fourth quarter of 2024, according to newly released Commerce Department data. This marks a 1.2% decline from the 3.1% growth rate seen in the previous quarter. Economists attribute the slowdown to hurricanes, labor strikes, and a drop in trade and investment.

Despite strong consumer spending, which increased by 4.2%, growth fell short of analysts’ predictions. Initial forecasts had expected 2.5% GDP growth for the October-December period.

Consumer Spending and Trade Impact

Samuel Tombs of Pantheon Macroeconomics noted that the rise in consumer spending was largely driven by increased purchases of goods, particularly cars. He warned that this might be a temporary surge, influenced by consumer fears over potential tariff-related price hikes.

Meanwhile, the report showed a decline in both exports and imports, though this had a neutral effect on overall GDP calculations. Economists subtract imports from growth figures since they involve foreign-made goods rather than domestic production.

Private Investment and Economic Uncertainty

Private investment also declined, with analysts pointing to the impact of the recent Boeing strike. This slowdown in business spending adds to concerns about economic stability as the country faces policy changes under President Donald Trump, who took office this month. His plans for spending cuts and trade tariffs have created uncertainty about the US economic outlook.

Economic Resilience and Future Outlook

Despite the slowdown, some experts remain optimistic. Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, noted that the US consumer remains strong, backed by wealth growth, a solid labor market, and lending. She described overall 2024 growth as “surprisingly strong.”

Analysts also caution that the latest GDP figures are preliminary and could be revised, especially given the impact of two major hurricanes that hit the US in the fall.

Source: bbc.co.uk