The U.S. economy is still doing well as Americans continue to spend

Consumer spending kept the U.S. economy humming in October, November and December. The economy grew at an annual rate of 2.3% during the quarter. Kamil Krzaczynski/AFP hide caption

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Kamil Krzaczynski/AFP

Consumer spending kept the U.S. economy humming in the final months of 2024.

The nation's gross domestic product grew at an annual rate of 2.3% in October, November and December, according to a report from the Commerce Department Thursday. That's down slightly from the previous quarter when GDP grew at a 3.1% annual pace.

Consumers ramped up their spending in the final months of the year, opening their wallets for both goods and services. Spending on big-ticket items jumped at an annual rate of more than 12%, which may have been driven partly by a desire to buy before any of the new tariffs threatened by President Trump kick in.

"The consumer is driving the economic train," says Mark Zandi, chief economist at Moody's Analytics. "The economy is creating a boatload of jobs and unemployment is low," so shoppers have money to spend.

By contrast, business investment was down during the quarter.

The economy ended last year 2.5% larger than it was in the final months of 2023. That's stronger growth than most other countries enjoyed last year. GDP in Europe, for example, was flat.

A booming stock market and record-high home values also boosted people's willingness to spend — especially among the wealthy.

"When they feel wealthy, they feel confident and they save a little bit less and spend a little bit more," Zandi said. "The real juice here is coming from folks who are in good financial shape. Lower-income households, they're still struggling."

Forecasters expressed some uncertainty about whether the solid economic growth would continue this year.

"The biggest risk to our 2025 forecast is an immediate imposition of across-the-board tariffs on key trading partners," wrote Bernard Yaros of Oxford Economics in a research note.

He projects that if Trump follows through on his threat to impose tariffs on goods from Canada, Mexico and China, it could shave more than 1% off GDP growth this year.

Even though Americans are spending, many still feel anxious about the economy. A report from the Conference Board released this week shows consumer confidence fell to a four-month low in January.