The US economy expanded at a robust 2.5% growth rate over the past year, according to new Commerce Department figures released Thursday. This growth is largely attributed to consumer spending, which accounts for approximately 70% of the US economy. Americans’ spending power was bolstered by wealth creation, a strong labor market, and lower interest rates.
Gross domestic product, the broadest measure of economic output, showed an annualized rate of 2.3% in the fourth quarter, slightly below economists’ expectations of a 2.4%. Business investment also fueled growth, although it reversed in the final months of the year.
Consumer spending surged in the October-through-December period, with an annual rate of 4.2% in the fourth quarter. This represents a significant increase from the prior quarter’s 3.7%. The boost was driven by purchases of durable goods, such as furniture and cars, which registered a stunning 12.1% growth rate.
However, business investment took a hit, contracting at an annual rate of 2.2% in the fourth quarter. Nonresidential fixed investment, which captures how much businesses invest in their operations, declined sharply from the 4% gain in the prior three-month period.
Economists expect the US economy to continue its expansion into 2025, but there are concerns about the potential economic impact of President Trump’s policies, including mass deportations and stiff tariffs. While Fed Chair Jerome Powell noted that the strong numbers mask some economic pain under the surface, he also warned that the US economy remains in a good place with a steady labor market and slowing inflation.
Source: https://edition.cnn.com/2025/01/30/economy/us-economy-gdp-q4/index.html