The economy received a kind of gift from the holiday shopping season: December saw a spike in consumer spending, capping off another robust year of growth and setting the stage for the U.S. to develop rapidly once more in early 2025.
The government reported on Friday that consumer expenditure increased by a significant 0.7% last month. A 0.6% gain was predicted by economists surveyed by The Wall Street Journal.
Consumer spending increased 4.2% in the fourth quarter due to the year-end splurge, the largest increase in nearly two years. That is nearly twice as quickly as the average quarterly increase in spending.
The U.S. economy is primarily driven by consumer spending, which makes up around 70% of all activity.
Last month, incomes increased by 0.4%.
Big picture: The U.S. economy is so strong and resilient that it seems unlikely that the Federal Reserve will lower interest rates anytime soon. As firms vie for personnel and materials, a robust economy usually pushes inflation higher.
The drawback is that interest rates will stay high and keep hurting important sectors of the economy like manufacturing and housing.