U.S. economy was top election issue but ends year firing on all cylinders

As a matter of metrics, the U.S. economy is ending the year in excellent shape, with inflation mostly riding the downward trend that rang in 2024, the jobs sector softening but in better balance than 12 months ago and wages continuing to rise, albeit at a somewhat slower pace than this time last year.

At the conclusion of a December meeting at which the Federal Reserve levied a third straight reduction to its benchmark interest rate, following earlier cuts in September and November, Fed Chairman Jerome Powell said the U.S. economy ended the year continuing to outpace expectations, and the rest of the world.

“The U.S. economy is just performing very, very well, substantially better than our global peer group,” Powell said at a Dec. 18 press conference. “The outlook is pretty bright for our economy … but we have to stay on task.”

Inflation down but prices still high

But even as inflation ticked down intermittently in 2024, from the 3.1% Consumer Price Index reading in January to as low as 2.4% in September before inching back up to 2.7% in November, the rate still remains well above the Fed’s 2% target rate. The monetary body has now backed off previous allusions to as many as four additional rate cuts in 2025. In guidance coming out of its December meeting, the Fed is now signaling only two cuts in 2025 based on the most recent economic projections for the coming year.

And as the U.S. monetary body tempers its forward-looking optimism, things are still pretty rough out there from a consumer perspective.

Economic concerns were easily the top issue for voters as they pondered their choices ahead of the November election. A new analysis released by The Conference Board just ahead of the Christmas holiday found its Consumer Confidence Index dropped by over 8% in December amid drooping optimism about current business and labor market conditions.

While the pace of price increases for consumer goods and services has slowed, the functional reality is grocery prices are up around 25% over the last four years, while wages have only grown by 19% in the same period. The average interest rate for credit card users was 20.35% as of Dec. 18, according to data assembled by Bankrate, down from a record-high of 20.79% in August.

Mortgage rates were hovering near 8% for a 30-year fixed rate loan in late 2023 but had come down to just over 6.6% to kick off 2024. Those rates showed incremental fluctuations throughout the first half the year before eventually dropping to around 6% in September before rising yet again. In an update released on Dec. 26, Freddie Mac reported the average rate on 30-year fixed rate mortgage was 6.85%.

Economic metrics vs. consumer sentiment

In statewide polling conducted back in February by the Deseret News in partnership with the Hinckley Institute of Politics, Utahns were close to split when it came to their economic outlooks. When asked, “Looking ahead, how are you feeling about the economy in the coming year?”, 52% of respondents said they were somewhat or very pessimistic, 43% reported being somewhat or very optimistic and 6% said they didn’t know.

A new survey by the Deseret News/Hinckley Institute of Politics parsed questions about Utahns’ current economic outlooks from both the local and national viewpoints. And stark differences emerged.

When asked, “In general, do you think the American economy is on the right track or wrong track?” 20% of respondents said right track, 70% said wrong track and 10% were unsure or didn’t know.

Asked the same question about Utah’s economy, 46% of poll participants said their state was on the right track, 38% said wrong track and 16% said they were unsure or didn’t know.

Sour consumer sentiment was rampant across the country in 2024, according to multiple national polls, including a September survey by Pew Research Center that found Americans’ views of the nation’s economy were “largely negative” amid concerns over the prices of food and consumer goods and increasing worries about housing costs and the availability of jobs.

But that collective cloudy economic view didn’t keep holiday shoppers at bay in the final months of 2024.

Holiday shopping

According to data collected by Mastercard, overall holiday shopping from Nov. 1 to Dec. 24 was up 3.8% over 2023, driven in large part by a 6.7% jump in online holiday spending. In-person retail spending saw a 2.9% increase over the period.

On Cyber Monday alone, U.S. consumers shelled out some $13.3 billion in online purchases, the biggest single day of online spending on record, according to tracking by Adobe Analytics. In the peak hours of 8 p.m. to 10 p.m., consumers spent $15.8 million every minute.

Steve Sadove, senior adviser to Mastercard and former Saks CEO and chairman, told Reuters that 2024 holiday spending rose even when higher prices due to inflation were factored in. He noted that the last five days of the holiday season accounted for 10% of all holiday spending, showing “a lot of strength in the end.”