The economy grew 2.8% in 2024, a year of growth that came despite consistently high interest rates by the Federal Reserve to limit the inflation still affecting households.
The new data, adjusted for inflation, were published Thursday by the Bureau of Economic Analysis in its report for gross domestic product for the fourth quarter.
The data showed that President Joe Biden’s last year in office saw solid GDP growth that was a tenth of a percentage point slower than 2023. It was also much slower than his first year in office when the economy was still recovering from the COVID-19 pandemic.
It also sets a benchmark for President Donald Trump, who campaigned on turbocharging the economy. He will be pushing for higher economic growth in 2025 than what was experienced during Biden’s final year in office.
The report showed GDP growing at a 2.3% annual rate in the final quarter of this past year, less than the 2.7% rate that economists had expected. That number is a preliminary estimate and will be revised in the coming months.
Consumer spending rose, in both goods and services, which helped prop up the overall GDP numbers. Government spending also increased.
A decrease in imports also added to GDP growth because imports are subtracted in the calculation of GDP.
But declining private investment dragged down GDP.
“Net, net, consumer spending was off the charts in the fourth quarter GDP report, and not just because of goods purchased to get out ahead of any potential import tariff hikes because services expenditures like those for health care were robust,” said Chris Rupkey, chief economist at FWDBONDS. “Economic growth slowed from its strong pace earlier in the year, but only because business investment in equipment and inventories showed surprising weakness.”
This is the first GDP report since Trump began his second term, although it reflects the final numbers of Biden’s time in office.
The GDP numbers for 2024 now give us a full snapshot of how economic output performed under Biden’s tenure.
For reference, the economy expanded 2.9% in 2023, 2.5% in 2022, and 5.9% in 2021, which was the first year of Biden’s presidency and a time when the U.S. economy was rapidly rebounding from the pandemic shutdowns.
The latest GDP numbers indicate that the economy, and in particular household consumption, hummed right along despite the pressures of inflation and high interest rates.
The Fed began hiking its target interest rate in March 2022 in response to inflation, which began rising in the middle of 2021 and soon grew into a tsunami that hadn’t been seen in generations. At its peak, price growth crested at about a 9% annual pace.
Since its peak, inflation has fallen to a 2.9% rate, according to the latest consumer price index numbers. That is still above the Fed’s preferred 2% level, although it shows that the central bank’s nearly two-year quest to tamp down inflation has borne results.
Higher interest rates are intended to dampen demand and thus slow price growth, but if demand is hit too hard, it can cause an economic downturn or recession. Yet Thursday’s GDP numbers show that 2024 saw continued expansion rather than contraction.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
The Fed finally pivoted to cutting interest rates in September and has since lowered its interest rate target by a whole percentage point. But the Fed appears poised to hold rates where they are now for the near future as inflation continues to still run too hot and GDP and the labor market remain strong.
The economy added 256,000 jobs in December, and the unemployment rate fell a tenth of a percentage point to 4.1%, the Bureau of Labor Statistics reported. Investors expected roughly 155,000 new jobs and the unemployment rate to remain at 4.2%.
