Jan. 8, 2025 — The U.S. economy demonstrated notable resilience in 2024, weathering inflation, high interest rates, and other challenges, according to National Retail Federation (NRF) chief economist Jack Kleinhenz. Economic growth is projected to continue into 2025, supported by steady expansion, a strong labor market, and easing inflation.
“The U.S. economy ended 2024 on a high note and the outlook looks promising for 2025,” says Kleinhenz in the January edition of NRF’s Monthly Economic Review. “Recent performance shows the economy is on solid footing and has been growing at a steady pace and above its historical average. The labor 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.”
Gross domestic product (GDP) for 2024 is estimated to have grown by 2.7% compared to 2023, based on preliminary data from the year’s first three quarters and the early fourth quarter. For 2025, GDP growth is expected to range between 2% and 2.5%, though various factors, including policy changes and global trade dynamics, could influence the trajectory, according to Kleinhenz.
Kleinhenz shares that consumer spending, a key driver of the economy, was buoyed in 2024 by a robust labor market. Wage growth outpaced inflation, and unemployment remained low, with ongoing claims for unemployment benefits increasing only slightly over the year. Average hourly wages rose 4.4% on an annualized three-month average in November.
Consumer spending on goods and services rose 5.5% year over year in November and December, unadjusted for inflation, while disposable personal income increased by 5.2%, supporting the growth in consumer purchases. Measured by the Federal Reserve’s preferred Personal Consumption Expenditures Price Index, year-over-year inflation fell to 2.4% in November, approaching the Fed’s target of 2%. NRF’s calculation of core retail sales—which excludes auto dealers, gas stations, and restaurants—increased by 4% year over year on a three-month moving average in November and by 3.8% over the first 11 months of the year.
Despite strong consumer spending, consumer confidence remained subdued for much of 2024, influenced by lingering concerns over high prices. However, sentiment improved in December, with the University of Michigan consumer sentiment index rising to its highest level since April 2024.
The Fed reduced interest rates by a quarter point in December and is expected to lower rates by a half point in 2025, aiming to maintain economic momentum while keeping inflation under control.