The 2024 Economy and 2025 Preview
Kevin M. Bahr CBEI Chief Analyst; Emeritus Professor of Business Sentry School of Business and Economics
As 2024 comes to an end, overall, the U.S. economy is in great shape. Housing continues to be a sore spot, but the economy keeps rolling along. In 2024 economic growth was strong with more Americans working than ever as job gains continued and real wages were increasing. The U.S. stock market hit several record highs and was a global leader in providing returns to shareholders while interest rates fell. Although consumers may still feel a hangover from recent high global inflation, U.S. inflation continued its descent from the 2022 high and was approaching the Federal Reserve’s 2% target level. The housing market remained a challenge, as relatively high financing costs and low inventory made home buying challenging. 2025 brings economic uncertainty, particularly with tariffs and trade, changes in fiscal policy with respect to taxes and government spending, and potential changes for the administration of monetary policy. Current economic momentum, however, makes the U.S. economy poised to continue and sustain its expansion. Unless an economic bump or shock occurs in 2025, moderate economic growth is expected to continue. Economic Growth 2024 The U.S. economy continued to roll along in 2024, sustaining the expansion that began in the second half of 2020. Economic growth is measured by changes in Gross Domestic Product (GDP), which is the value of goods and services produced in a given time period. Personal consumption accounts for approximately two-thirds of GDP, and personal consumption has been the key and consistent driver of economic growth during the economic recovery, contributing positively to GDP growth since the third quarter of 2020. Between 2019 and 2023, the U.S. had stronger economic growth than any other G7 country, including Canada, Italy, Japan, France, the United Kingdom, Germany, and the Eurozone. Economic growth continued in 2024, propelling the U.S. economy to arguably the strongest in the world. The table below shows how changes in the four components of Gross Domestic Product (GDP) contributed to the change in U.S. economic growth since 2020.
Contributions to Percent Change in Real Gross Domestic Product Annualized Rate (Source: Bureau of Economic Analysis) 2020 2021 2022 2023 2024 Q1
2024 Q2
2024 Q3
GDP
-2.2
6.1
2.5
2.9
1.6
3.0
2.8
Personal Consumption
-1.70 -0.82 0.60 -0.24
5.83 1.54 -0.05 -1.26
2.06 1.07 -0.20 -0.42
1.72 0.02 0.66 0.49
1.30 0.64 0.30 -0.61
1.90 1.47 0.52 -0.90
2.46 0.07 0.85 -0.56
Investment
Government Spending
Net Exports
Central Wisconsin Report - Fall 2024
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