The U.S. economy showcased a robust 2.3% annual growth rate in the last quarter of 2024, largely driven by a notable 4.2% increase in consumer spending—the fastest pace we’ve seen since early 2023. This surge in spending helped counterbalance declines in business investment and inventory buildup.
However, the economic landscape for 2025 presents several challenges. President Donald Trump’s recent introduction of sweeping tariffs, dubbed the “Liberation Day” tariffs, has ignited trade tensions that could threaten global economic stability. Additionally, proposed mass deportations may result in labor shortages, which could push wages higher and stoke inflation.
While the Federal Reserve has opted to pause interest rate cuts after implementing three reductions in late 2024, progress against inflation has stalled, adding to the prevailing uncertainty. Although unemployment remains low at 4%, recent data shows a rise in jobless claims, partially attributed to layoffs among federal workers.
