The Role of US Economic Growth: A Steady Foundation for 2024 Note that the blog post provides an analysis of the US economy's performance in 2024, highlighting its resilience, key drivers of growth, and challenges. It also looks ahead to 2025, discussing the potential impact of policy decisions on economic growth and stability.

Here is a rewritten version of the blog post with a polished and professional tone:

The Role of US Economic Growth: A Steady Foundation for 2024

As President Donald Trump takes office, the United States economy has demonstrated remarkable resilience in the face of uncertainty. The latest data from the Commerce Department reveals that GDP growth remained steady at a solid clip of 2.3% in the October to December period, with consumer and government spending playing key roles.

Consensus Forecast: A Strong Foundation for Economic Growth

This growth rate is consistent with a consensus forecast by Briefing.com, indicating a strong foundation for the economy under Trump's leadership. The data suggests that the economy has broadly held up despite high interest rates, thanks to a resilient labor market with low unemployment and still-growing wages.

Consumer Spending: A Key Driver of Growth

Consumer spending on both goods and services continued to drive a substantial portion of growth, according to Joel Kan, deputy chief economist at the Mortgage Bankers Association. This is not surprising, given that consumers have been able to maintain their purchasing power despite drawing down on savings accumulated during the Covid-19 pandemic.

The Impact of Wages and Inflation

Wages have continued to outpace inflation, allowing consumers to maintain their purchasing power. Additionally, recent hurricanes triggered "replacement demand" for items like vehicles, boosting economic activity. KPMG chief economist Diane Swonk notes that massive wealth effects from sharp increases in equity and home values have also boosted spending among higher-income households.

A Souring Mood Among Consumers: A Challenge for Policymakers

While the overall economy appears strong on paper, there are signs of a "souring mood" among consumers. According to Swonk, inequality and unease beneath the surface due to high prices for food and shelter are contributing factors. This sentiment is likely to persist in 2025, making it essential for policymakers to address these concerns.

Government Spending: A Boost for Economic Growth

Government spending was another driver of growth in 2024. As Swonk notes, the outgoing administration of former President Joe Biden pushed funding out the door in its final months, including defense spending for Ukraine. This injection of funds helped boost economic activity and will likely continue to support growth in the short term.

Policy Uncertainty: A Drag on Business Investment

However, there is one area where uncertainty has had a negative impact: business investment. According to Robert Frick, corporate economist with the Navy Federal Credit Union, businesses invested less in inventories than anticipated, which could be a response to economic uncertainty surrounding the new presidential administration.

Sequencing and Magnitude of Policies: A Critical Consideration

As policymakers navigate the complexities of tariffs and immigration policies, it is essential to consider the sequencing and magnitude of these measures. Swonk expects that tariffs will increase in 2025, although they may not necessarily translate into full-blown trade wars with all countries. Matthew Martin, senior US economist at Oxford Economics, notes that Trump's "inflammatory words" on trade policy appear to be more of a negotiation tactic than a genuine commitment to trade wars.

Trade Wars: A Loser for Everybody

Dan North, senior economist for Allianz Trade North America, agrees that trade wars tend to be losers for everybody involved. As policymakers weigh the benefits and drawbacks of these policies, it is essential to prioritize growth and stability over short-term gains.

Conclusion

In conclusion, the US economy has demonstrated remarkable resilience in 2024, with consumer and government spending playing key roles. While there are concerns about policy uncertainty and a "souring mood" among consumers, the overall picture remains positive. As policymakers look to the future, it is essential to prioritize growth and stability while addressing the challenges facing consumers and businesses.

A Steady Foundation for 2025

Looking ahead to 2025, there are signs that the economy will continue to grow at a steady pace. While there may be some slowing due to policy uncertainty and a "souring mood" among consumers, the foundation is strong enough to support continued growth. As policymakers navigate the complexities of tariffs and immigration policies, it is essential to prioritize growth and stability while addressing the concerns facing consumers and businesses.

Key Takeaways

The US economy grew at a solid clip of 2.3% in the October to December period.
Consumer spending on both goods and services continued to drive a substantial portion of growth.
Government spending was another driver of growth, with defense spending for Ukraine playing a key role.
Policy uncertainty surrounding tariffs and immigration policies has had a negative impact on business investment.
The sequencing and magnitude of these policies will be crucial in determining the direction of the economy in 2025.

By understanding the role of US economic growth in 2024 and the challenges facing the economy, policymakers can make informed decisions to support continued growth and stability.

Edward Lance Arellano Lorilla

CEO / Co-Founder

Enjoy the little things in life. For one day, you may look back and realize they were the big things. Many of life's failures are people who did not realize how close they were to success when they gave up.