National Retail Federation (NRF)’s chief economist Jack Kleinhenz believes that based on the data from the initial three quarters and preliminary figures from the fourth quarter’s first two months of 2024, the gross domestic product (GDP) is poised to register a growth rate of 2.7% over the preceding year.
Kleinhenz said: “The US economy ended 2024 on a high note and the outlook looks promising for 2025. Recent performance shows the economy is on solid footing and has been growing at a steady pace and above its historical average.
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“The labour market is healthy, unemployment is low, inflation has fallen almost to the Federal Reserve’s target even though it remains somewhat sticky, and the direction of interest rates remains lower.”
The previous year was characterised significantly by the consumer’s robust ability to bounce back and a strong job market. Consumer expenditures were bolstered by low joblessness rates and wage increases that exceeded inflation, even as hiring activities decelerated, according to Kleinhenz.
While cautioning against premature conclusions ahead of the NRF’s annual forecast, Kleinhenz noted there is ample reason to anticipate sustained economic expansion in 2025.
The trajectory will likely be influenced by various dynamic factors including trade, immigration, regulatory changes, and fiscal policies. Nevertheless, he expressed confidence in the continued strength of US consumer spending.
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By GlobalDataLooking ahead to 2025, forecasts suggest that GDP growth will likely range between 2% and 2.5%.
As of the week ending 21 December, there were 1.8m continuing unemployment insurance claims, just 40,000 more than the previous year.
Meanwhile, new claims decreased from 219,000 during this period to 211,000 the following week. In November, average hourly wages rose by 4.4% based on a three-month annualised average.
Inflation metrics also showed promising trends, with year-over-year inflation measured by the Personal Consumption Expenditures Price Index dropping to 2.4% as of November, nearing the Federal Reserve’s objective of 2%. This decrease was significant compared to wage growth rates.
Last month, Kleinhenz stated expectations for a strong holiday sales period were intact following a robust third quarter and positive economic indicators.
Consumer expenditure on goods and services exhibited a notable increase in the last two months of the year, while disposable personal income rose by 5.2% year-over-year.
As of November, core retail sales — defined by NRF to exclude automobile dealers, gas stations, and restaurants — rose 4% year-over-year on a three-month moving average and saw a 3.8% increase for the first 11 months of the year.
With December data set to be released next week, spending trends are poised to meet or potentially exceed NRF’s forecasted growth of 2.5% to 3.5% for the holiday shopping season compared to 2023.
The Federal Reserve’s decision to reduce interest rates by a quarter point in December reflects a cautious approach aimed at maintaining progress on inflation without stalling economic growth. Federal officials have signalled a potential half-point rate reduction over the course of 2025.
