US economy grew 2.8 percent in 2024, but slowed to end year

Fourth quarter economic growth eased to an annualized rate of 2.3 percent, shy of an expected 2.6 percent, as the economy heads into uncertain territory.

Gross domestic product (GDP) growth slowed from an impressive 3.1 percent in the third quarter and 3 percent in the second quarter, according to data released Thursday by the Commerce Department.

Real GDP increased at 2.8 percent on the year, above the non-inflationary growth rate.

Economists said the number was an excellent one in light of a downturn that many expected in 2024, but that they anticipate more moderate growth in coming quarters.

“The economy is expected to gently ease towards its 2 percent-trend pace in the coming quarters,” EY economist Gregory Daco said in an analysis, calling the fourth quarter number “robust.”

Did the economy actually grow or was it simply being inflated?

People forget, especially democrats, that the reasons for economic growth are due to the tax cuts put in place by Trump.. Trump's tax cuts are still in place,and no doubt, a lot of whatever growth occurs is due to people keeping more of their earnings after those Trump tax cuts. Now, the subject turns to making sure those tax cuts are not allowed to expire. Biden can be credited with not getting the tax cuts rescinded, but the trigger for growth in the last 8 years is the tax cuts. The economy took a major downturn because of the covid pandemic, but the blueprint for growth was still in place from when Trump passed those tax cuts.

Biden did squat to grow the economy, but growth did occur as a result of Trump policies which were still in place.

Sane analysis here via conservative economist Brian Wesbury

Implications: The US economy grew at a 2.3% annual rate in the fourth quarter, slightly slower than the consensus expected, but slightly faster than the average annualized pace of 2.1% in the past twenty years.

The best news in the report was that what we think of as Core Real GDP – consumer spending, business fixed investment, and home building, and excluding the more volatile categories like government purchases, inventories, and international trade – grew at a 3.2% annual rate in the fourth quarter and was up 3.0% versus a year ago.

However, there were economic blemishes, as well. Business fixed investment – equipment, commercial construction, and intellectual property – declined at a 2.2% annual rate in Q4 in spite of the boom in AI spending, the first drop since 2021. These investments are crucial to lifting productivity growth in the years ahead. Meanwhile, much of the gain in Real GDP was accounted for by consumer spending, which grew at a 4.2% annual rate and is up 3.2% in the past year.

The reason that’s a problem is because some of this growth in consumer spending is unsustainable; the personal saving rate declined to 4.1% in the fourth quarter, well below the 6.7% rate that prevailed pre-COVID. A move by consumers to reassert a higher saving rate again could mean an abrupt slowdown in the growth of consumer spending as well as the production of those goods and services for consumers. We also can’t help but notice the continued abnormally large contribution from federal government spending, which grew at a 3.2% rate in Q4 and is up 4.0% in the past year.

Eventually the rapid growth in government will end, and the economy will pay a temporary price.

On the inflation front, GDP prices rose at a 2.2% rate in Q4 and are up 2.4% in the past year, still above the Federal Reserve’s 2.0% target.

In other news this morning, initial claims for unemployment insurance declined 16,000 to 207,000 last week; continuing claims dropped 42,000 to 1.858 million. These figures signal continued job growth in January. In other recent news, the Richmond Fed index, a measure of mid-Atlantic factory activity, rose to -4 in January after a -10 reading in December. The most under-reported indicator of the week was on the M2 measure of the money supply, which grew at a moderate 4.9% annual rate in December and is up 3.9% from a year ago. M2 soared in 2020-21, heralding the inflation surge that followed. Then M2 fell in 2022-23, signaling some of the drop in inflation. But we just finished 2024 with inflation still above the Fed’s target. As a result, the Fed must be careful with any rate cuts to make sure M2 doesn’t surge again. Look for the Fed to hold the line against rate cuts through at least the Spring unless the economy takes a sudden turn for the worse.

What growth? For decades going back to at least Bush the economy has been supported by massive government spending. We are a credit card economy. There is no growth, if the spending is ever cut we will fall off a cliff.
br> So, we have lived under an imaginary economy, and there's been no growth?

BTW, credit does lead to growth. Businesses depend on credit. Loans are credit. Mortgages are credit. Car loans are credit. People might not have all the money necessary available when needed, therefore... credit. Most loans are eventually paid back. Meanwhile, growth has resulted.

Even government borrowing has resulted in growth, when they use it for necessary expenses. That's not to say that government spending is not out of control. Government should not be borrowing to meet its expenses. But economic growth is as a result of private and business investment, including spending that comes from borrowed money.

GDP = (C)onsumption + G(ovt Spending) + I(nvestment) + (Exports - Imports)

It does get fuzzy, with somehow Social Security payouts being defined as Consumption, but in a general way notice how G can raise GDP. Tax reductions increase I, but the magnitudes are so far past reasonable that you can never get tax reduction sufficient to come close to G.

Oh, and you really want to see why it is all impossible? That G parameter that adds to GDP — interest on the national debt is gov’t spending, though in form of Transfer payment. Meaning, the holders of the debt collect interest, which they then pour into Investment or Consumption. This means interest on the national debt adds to GDP.

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