US Economy Grows 2.5% in 2024, Fed Holds Rates Steady

WASHINGTON — The U.S. economy grew by 2.5% in 2024, driven by strong consumer spending and business investment, according to new data released Thursday by the Commerce Department. The fourth-quarter growth rate of 2.3% slightly missed economists’ expectations but marked the eleventh consecutive quarter of expansion.

The resilient labor market and robust consumer spending, which accounts for about 70% of the economy, were key drivers of growth. Business investment also contributed, though a decline in inventories weighed on the overall figure. The data, adjusted for seasonal swings and inflation, reflects a steady economic expansion despite higher interest rates.

The Federal Reserve, which held its key interest rate steady on Wednesday, signaled confidence in the economy’s trajectory. Fed Chair Jerome Powell noted that the labor market remains strong and inflation is on track to slow further. However, he cautioned that underlying economic challenges persist.

Economists predict continued growth in 2025, though uncertainty surrounds the potential impact of former President Donald Trump‘s proposed policies, including mass deportations, tariffs, and permanent tax cuts. The International Monetary Fund forecasts U.S. GDP growth of 2.7% in 2025, positioning the country as the fastest-growing advanced economy globally.

Contributions to fourth-quarter GDP were mixed. Consumption added 2.82 percentage points, supported by strong services and goods spending. Government spending contributed 0.42 percentage points, while net exports added 0.04 percentage points. However, a sharp decline in inventories deducted 1.03 percentage points from the overall figure.

The GDPNow model, which predicts economic growth based on recent data, accurately forecasted the 2.3% growth rate for the fourth quarter. This tool has become a critical indicator for economists and policymakers tracking the U.S. economy’s performance.