U.S. Personal Income and Consumer Spending See Growth
Washington, D.C., Friday, 31 January 2025.
In December 2024, U.S. personal income rose by 0.4%, while consumer spending increased by 0.7%, reflecting steady economic confidence amid moderate inflation, as reported by the U.S. Bureau of Economic Analysis.
Latest Economic Indicators Show Robust Consumer Activity
The latest data from December 2024 reveals a continued expansion in consumer spending and personal income, with personal consumption expenditures (PCE) exceeding expectations [1]. The PCE price index, the Federal Reserve’s preferred inflation gauge, showed a year-over-year increase of 2.6% [1], indicating persistent but moderating inflationary pressures. Core PCE, which excludes volatile food and energy prices, maintained a steady rate of 2.8% [1], suggesting underlying price stability in the economy.
Federal Reserve’s Stance on Inflation
The Federal Reserve maintained its key interest rate between 4.25% and 4.5% in its latest meeting on January 28, 2025 [1]. Fed Governor Michelle Bowman has emphasized the need for continued vigilance, stating that more work is required to bring inflation closer to the Fed’s 2% target [1]. This target has remained elusive since February 2021 [1], though Chicago Fed President Austan Goolsbee expressed confidence in the current trajectory, noting, ‘I have comfort that we’re on that path’ [1].
GDP Growth and Economic Performance
The broader economic context shows encouraging signs, with the U.S. Bureau of Economic Analysis reporting that real GDP increased at an annual rate of 2.3% in the fourth quarter of 2024 [6]. This follows a more robust 3.1% increase in the third quarter [6]. For the full year 2024, the economy expanded by 2.8%, showing resilience despite various challenges [6]. The growth was primarily driven by increases in consumer spending and government expenditures, though partially offset by decreases in investment and exports [6].
Looking Ahead: Economic Implications
The combination of rising personal income and increased consumer spending suggests continued economic momentum heading into 2025 [1]. The PCE data indicates that while inflation remains above the Fed’s target, the economy is maintaining a balance between growth and price stability [1]. However, Fed officials remain cautious, with Governor Bowman suggesting that current interest rates should be maintained until clear signs of inflation reduction become evident [1].