U.S. economic growth slowed to 2.3% in late 2024
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The U.S. economy expanded throughout 2024, but growth slowed in the last three months of the year as businesses pulled back on investments and exported fewer goods overseas.
Fresh government data this morning from the Bureau of Economic Analysis shows that the economy expanded at an annual rate of 2.3% in the fourth quarter, down from annualized growth of about 3% in the two previous quarters. That reading capped off a year of 2.8% growth for Gross Domestic Product, which sums up the goods and services produced in the United States.
While the economy has been incredibly resilient, even in the face of elevated interest rates, it faces a new round of uncertainties that could hobble growth this year. The Trump administration has moved quickly to freeze federal hiring and curb immigration. It has also said it plans to issue sweeping new tariffs on some of the country’s largest trade partners, which could happen as early as this weekend. Economists say all of those measures are likely to cut into economic growth and create new hurdles for businesses and households.
At the same time, lower taxes and regulation rollbacks could result in higher spending, at least in the short term.
“There’s no shortage of wild cards to watch in 2025,” said Ali Wolf, chief economist at Zonda, a data and consulting firm. “The policies implemented by the incoming administration could have a profound impact on the economy.”
Much of the latest growth was driven by hefty consumer spending, as Americans stocked up on big-ticket items to guard against possible price hikes from new tariffs. Spending on durable goods—such as cars, appliances and furniture—rose by 12% in the fourth quarter.
“[President Donald] Trump’s talk of higher import taxes is already altering behavior by U.S. households,” said Joe Brusuelas, principal and chief economist for RSM US. “They made those big purchases at the end of 2024 instead of in 2025, to avoid possible price hikes.”
That spike in spending, though, was offset by a slowdown in business investments in buildings and equipment. U.S. companies also bulked up on inventory and exported fewer items, which cut into the GDP reading.
“Time will tell if businesses are simply exhibiting temporary caution on equipment purchases after the November election results until they see what Trump 2.0 means for them, or whether the slowdown in GDP growth is something to be worried about,” Chris Rupkey, chief economist at Fwdbonds, a financial research firm, wrote in a note to clients.
Still, the economy remains on solid footing. Inflation is coming down, the job market is solid, and unemployment, at 4.1%, is near historic lows. Plus, consumer spending, which drives nearly three-quarters of the U.S. economy, has held up as Americans continue shelling out for cars, appliances and international travel.
Many economists, though, expect growth to taper off this year, in part because of Trump’s plans for new tariffs and mass deportations.
“I see growth slowing but still holding up relatively well,” said Beth Ann Bovino, chief economist at U.S. Bank. “Consumer spending has held up incredibly well.”
In Georgia, Tony Owens has about $70,000 worth of imports sitting in his warehouse. Owens, who owns a garage door company, says many of the components for the custom doors he sells come from Canada. A 25% tariff would be tough to absorb. Already, wholesale garage door costs have doubled, to about $4,000 a pop, since the pandemic.
“If the Trump administration truly does slap a 25% tariff on Canada, that’s a big deal to us,” he said. “Usually, we buy as needed – we custom order a lot – but now I have money tied up in things I haven’t sold yet.”
Kenny Vasko, who co-owns Dog House Music Studios in Lafayette, Colorado, is making similar bets. Almost all of his sound equipment comes from abroad, and he has spent thousands stocking up on nearly three years’ worth of supplies ahead of possible tariffs.
“We have our office and closets stocked to the gills with drumsticks and cables,” he said. “We have a fear that either prices will go up, quality will go down, or both, when it comes to large items like P.A. speakers or small items like guitar strings.”
Still, he said, he’s putting off larger purchases, including $30,000 in studio equipment and speakers. There’s too much economic uncertainty, he said, and it isn’t clear what business will look like this year.