The United States economy in 2024 proved a mix of resilience and challenges, reflecting the complexities of evolving global dynamics. While robust consumer spending, business investment, and government expenditure drove steady growth, persistent inflation, market volatility, and cautious monetary policy decisions posed notable obstacles.
The Federal Reserve’s efforts to balance inflation control with economic growth played a pivotal role in shaping the year’s economic narrative. Below is a closer look at the U.S. economic performance in 2024, highlighting key developments and trends.
Economic Growth
The U.S. economy maintained a steady growth trajectory, with real GDP increasing at an annual rate of 2.8% in the third quarter. This growth was largely driven by consumer spending, which remained a critical driver of economic activity, along with increased exports, federal government investments, and strong business capital expenditures.
Source: Trading Economics
The chart above shows that the U.S. economy grew at a small pace in Q1 2024 and then rebounded with strong numbers.
The labor market remained a bright spot, with unemployment holding steady at historically low levels. Job creation in key sectors such as healthcare, technology, and construction contributed to stable household incomes and sustained consumer confidence.
However, wage growth began to decelerate towards the end of the year, reflecting employers’ cautious approach amidst rising costs and uncertainties around future demand.
Monetary Policy
The Federal Reserve’s monetary policy played a pivotal role in shaping economic outcomes in 2024. In December, the Fed reduced interest rates by 25 basis points to a range of 4.25% to 4.50%, signifying a change to a less restrictive policy.
However, the central bank’s cautious messaging about additional rate cuts in 2025 tempered market expectations, emphasizing a balanced approach to managing inflation and supporting growth.
Source: Trading Economics
U.S. interest rates started to rise in 2022 and were held steady from July 2023 till September 2024 where the Fed unexpectedly cut interest rates by 50bps where the rate cut cycle started.
Persistent inflation remained a concern, with rates projected to hover above the Fed’s 2% target into 2025. Elevated costs for housing, energy, and services continued to weigh on household budgets, though some relief was observed in declining prices for goods and transportation.
The Fed’s efforts to strike a balance between curbing inflation and sustaining economic momentum underscored the complexity of the economic environment.
Financial Markets
Financial markets experienced heightened volatility throughout 2024, reflecting uncertainty around monetary policy and global economic conditions.
The U.S. stock market experienced significant growth, with the S&P 500 achieving a year-to-date return of approximately 26.47% by November. This surge was largely driven by the “Magnificent Seven” technology companies like Apple, Microsoft, Amazon, Alphabet, Meta Platforms, Tesla, and Nvidia which collectively accounted for a substantial portion of the market’s gains.
However, the market also faced volatility; for instance, on December 18, major indices like the S&P 500 and Nasdaq Composite recorded some of their steepest losses of the year following Federal Reserve signals of a more cautious approach to interest rate cuts in 2025.
The U.S. dollar was significantly volatile, appreciating against major currencies like the euro and Japanese yen, influenced by rising U.S. bond yields and economic policies. This strength posed challenges for U.S. companies with substantial international revenues, as foreign earnings translated into fewer dollars, potentially impacting overall earnings.
Additionally, the Federal Reserve’s cautious approach to interest rate cuts, aiming to mitigate inflation risks, further supported the dollar’s value.
Gold prices reached unprecedented levels, achieving an all-time high of $2,734/oz in October. This surge, representing a 29.96% increase from the previous year, was driven by factors such as central bank purchases, investor demand, and economic uncertainties.
Gold weakened in December 2024 because of strong U.S. economic data and hawkish Federal Reserve which strengthened the U.S. Dollar.
Despite the strengthening U.S. dollar, which typically inversely affects gold prices, the precious metal maintained its upward trajectory, highlighting its role as a safe-haven asset amid global economic fluctuations.
Source: Trading Economics
The chart shows the comparison of the performance of the U.S. Dollar and gold in 2024.
Conclusion
The U.S. economy in 2024 experienced a balance of growth, challenges, and opportunities. While strong consumer activity and low unemployment supported resilience, inflationary pressures and market volatility posed persistent challenges.
The Federal Reserve’s measured approach to monetary policy signalled a commitment to maintaining economic stability amidst complex dynamics. As the nation enters 2025, the focus remains on sustaining growth while addressing inflation and fostering a foundation for long-term prosperity.
