Jamie Spencer
The US economy expanded 2.5% over the past year, according to Commerce Department figures released Thursday, underscoring the solid economic foundation inherited by President Donald Trump.
Consumer spending remained strong, supported by a resilient labor market, contributing to nearly 70% of overall GDP. Business investment also played a role in 2024’s expansion, though it slowed in the final quarter.
Fourth-Quarter GDP Performance
The economy grew at an annualized rate of 2.3% in the fourth quarter, slightly below economists’ expectations of 2.4%. Consumer spending accelerated to an annual rate of 4.2%, up from 3.7% in the prior quarter, with spending on durable goods jumping 12.1%.
However, business investment was a weak spot. Nonresidential fixed investment contracted at an annual rate of -2.2%, reversing a 4% gain in the previous quarter. Analysts attributed this decline to uncertainty surrounding the new administration’s policies.
Impact of Trump’s Economic Policies
Trump has outlined major economic changes, including tariffs on Mexico and Canada, mass deportations, and making his 2017 tax cuts permanent. Economists caution that these measures could influence inflation and labor market dynamics.
“Trump’s pro-growth policies—lower taxes and deregulation—could support economic expansion,” said James Knightley, chief international economist at ING. “However, tariffs and labor shortages could stoke inflation, which may keep the Federal Reserve from cutting rates.”
What’s Next for the Economy?
While the economy remains strong, concerns persist about inflation and labor shortages due to Trump’s immigration crackdown. The Fed’s stance on interest rates will be closely watched as policymakers weigh economic risks and potential inflationary pressures.
