WASHINGTON — A humming American economy ended 2024 on a solid note with consumer spending continuing to drive growth, and ahead of what could be a significant change in direction under a Trump administration.

The Commerce Department reported Thursday that gross domestic product — the economy’s output of goods and services — expanded at a 2.3% annual rate from October through December.

For the full year, the economy grew a healthy 2.8%, compared with 2.9% in 2023.

The fourth-quarter growth was a tick below the 2.4% economists had expected, according to a survey of forecasters by the data firm FactSet.

Consumer spending grew at a 4.2% pace, fastest since January-March 2023 and up from 3.7% in July-September last year. But business investment tumbled as investment in equipment plunged after two straight strong quarters.

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Persistent Inflationary Pressure

Wednesday’s report also showed persistent inflationary pressure at the end of the 2024. The Federal Reserve’s favored inflation gauge — called the personal consumption expenditures index, or PCE — rose at a 2.3% annual pace last quarter, up from 1.5% in the third quarter and above the Fed’s 2% target. Excluding volatile food and energy prices, so-called core PCE inflation was 2.5%, up from 2.2% in the July-September quarter.

A drop in business inventories shaved 0.93 percentage points off fourth-quarter growth.

But a category within the GDP data that measures the economy’s underlying strength rose at a healthy 3.2% annual rate from July through September, slipping from 3.4% in the third quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.

Paul Ashworth, chief North America economist at Capital Economics, said that figure “suggests the economy remains strong, particularly given the fourth-quarter disruptions,” including a strike at Boeing and the aftermath of two hurricanes.

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Trump Inherits a Healthy Economy

President Donald Trump has inherited a healthy economy. Growth has been steady and unemployment low — 4.1% in December.

The economy has proven remarkably resilient after the Fed’s inflation fighters raised rates 11 times in 2022 and 2023 to combat the biggest surge in consumer prices since the 1980s. Instead of sliding into a recession, as most economists predicted, GDP kept expanding. Growth has now topped 2% in nine of the last 10 quarters.

On Wednesday, the Fed left its benchmark interest rate unchanged after making three cuts since September. With the economy rolling along, Fed Chair Jerome Powell told reporters, “we do not need to be in a hurry” to make more cuts. The Fed is also cautious because progress against inflation has stalled in recent months after falling from four-decade highs hit in mid-2022.

The European Central Bank cut its benchmark rate by a quarter point Thursday, underlining the contrast between more robust growth in the U.S. economy and stagnation in Europe, which recorded zero growth at the end of last year.

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Cloudy Economic Outlook

The U.S. economic outlook has become more cloudy, however. Trump has promised to cut taxes and ease regulations on business, which could speed GDP growth. But his plan to impose big taxes on imports and to deport millions of immigrants working in the United States illegally could mean slower growth and higher prices.

Trump said last week that he would lower oil prices and then “demand” lower interest rates – a topic he said he’d take up with Powell. But the Fed chair deflected questions about Trump’s comments Wednesday and said he’d had no contact with the president.

Trump has also tried to reshape the federal government, offering buyouts to workers and issuing a memo Monday night freezing federal grants, then rescinding the memo Wednesday after a public outcry.

Citing the “squeeze” on the federal government, Ashworth wrote in a commentary, “we wouldn’t be surprised to see a reversal in the first quarter. As a starting point, we expect first-quarter GDP growth to slow marginally below 2%.”

Thursday’s GDP release was the first of three Commerce Department estimates of October-December growth.