In 2024, the U.S. economy faced numerous challenges but managed to maintain its position as the G7 leader, according to the IMF. Key contributors were consumer spending and strict Federal Reserve policies.
Consumers Keep the Economy Afloat
The key drivers of the U.S. economy in 2024 were consumers. Wage growth outpaced inflation, boosting household purchasing power. Bloomberg Economics reports a 2.8% rise in household spending. However, pandemic-era savings are depleted, prompting many to rely on credit. Credit card balances have increased, and delinquency rates have risen, heavily impacting lower-income individuals. Job markets have weakened; hiring has slowed, and unemployment rates have ticked higher.
Inflation and Fed Policies
Despite the Federal Reserve's efforts, inflation remained stubborn. By November, the core personal consumption expenditures price index was 2.8%. The Federal Reserve cut rates by one percentage point in 2024, but no further cuts are expected in 2025. This led to market unrest and criticism of the Fed's strategy. Interest rates, notably those on mortgages, surged back to 7%.
Housing and Economic Agenda
The housing market remains challenging. Builders offered incentives to boost sales, including price cuts and financial perks. However, sales remain below pre-pandemic levels, with the resale market experiencing its worst year since 1995. President-elect Donald Trump's agenda adds to economic uncertainty with potential tariffs, deportations, and tax changes.
The U.S. economy in 2024 showcased resilience despite facing various internal and external challenges. This adaptability and growth in challenging conditions highlights the depth and diversity of the American economy.
