US economic growth steady in 2024 as Trump takes office

THE US economy expanded at a solid clip in 2024, helped by consumer and government spending, official data showed on Thursday (Jan 30), signalling its resilience as President Donald Trump takes over the reins.

Trump won a commanding victory in last November’s election on the back of public dissatisfaction over cost-of-living pressures, even as inflation has cooled while the job gains continued.

From October to December, the world’s biggest economy grew at an annual rate of 2.3 per cent in the fourth quarter, the Commerce Department said, slowing from the 3.1 per cent rate in the July-to-September period. The latest figure was in line with a consensus forecast by Briefing.com.

Trump took office for a second time on Jan 20, inheriting solid growth as his four-year term unfolds.

For 2024, gross domestic product rose 2.8 per cent from the annual level a year prior. Consumer spending, investment and government spending were among the drivers behind last year’s growth, according to Commerce Department data.

The world’s largest economy has broadly held up in the face of high interest rates, helped by a robust labour market with low unemployment and still-growing wages.

This has allowed consumers to keep spending, even as they drew down on savings accumulated during the Covid-19 pandemic.

Consumers have been “the foundation of the economy, and they’ve been the biggest driver to resilient growth in 2024,” said Matthew Martin, a senior US economist at Oxford Economics. He expects this to be sustainable for now.

“With layoffs low, a decent breadth of job growth and rising wages, we think real disposable income will continue to grow, and that’ll lead to continued spending,” he said.

KPMG chief economist Diane Swonk noted that government spending could have been stronger than expected, as the outgoing administration of former president Joe Biden pushed funding out the door in its final months.

While there remains uncertainty around Trump’s policies on tariffs and immigration, which could weigh on the economy, Swonk added that their effects will likely take time to materialise.

“When they hit matters, and the magnitude, and we don’t know any of that exactly yet,” she said.

She expects growth to cool in 2025 assuming tariffs are increased, although the hikes will not necessarily translate into full-blown trade wars with all countries.

Martin said that even though Trump has used “inflammatory words” on trade policy, these appear to be more of “a negotiation tactic”.

Analysts expect January’s employment figures will take a hit from devastating wildfires in California.

Brendan Boyle, the top Democrat on the House Budget Committee, called the fourth quarter growth figure “undeniable proof” that policies under Biden have proven effective. AFP