Summary
The US economy is strong heading into 2025 and a second Trump presidency. We expect Q4 GDP to have increased by 2.8% and 2024 GDP to have increased by approximately 2.6%. At the start of 2024, we expected growth of 1.7% for the year. We expected personal consumption spending to average about 1.2%. The final tally could be 3%. The labor market cooled but did not freeze, and the Fed’s well-publicized plans to cut short-term rates led to a beneficial decline in long-term rates throughout the summer. While many consumers still struggle with inflation, wealthier households are spending, buoyed by 2.4% unemployment for college graduates, a locked-in low mortgage rate and gains in their stock portfolios . Our optimism is tempered by the jump in the 10-year Treasury rate to 4.8% compared to 3.65% in September. Our US GDP growth forecast for 2025 is 2.1%. Fed officials’ median estimate is also 2.1%. Our quarterly GDP estimates for 2025 are 1.7%, 1.8%, 2.3% and 2.6%. Four indicators based on a wide range of current data support our assessment that the economy is healthy and growing. On January 9, the Federal Reserve Bank of Atlanta’s GDP nowcast estimated growth of 2.7% in the fourth quarter. On January 10, the Federal Reserve Bank of New York’s Staff Nowcast for the fourth quarter forecast growth of 2.36%. The weekly economic index tracked by the Federal Reserve Bank of Dallas is based on 10 daily and weekly indicators of consumer behavior, the labor market and production. If, for example, a
