US Economic Output Surges to Fastest Pace in Nearly Three Years

The US economy concluded 2024 on a high note, with economic output growing at an annualized rate of 3.3% in the fourth quarter, marking the fastest pace in nearly three years. This robust growth was driven by a surge in consumer spending and business investment, as indicated by data from the Bureau of Economic Analysis (BEA).

Consumer spending, which accounts for about 70% of US economic activity, increased at a 3.7% annualized rate, the fastest pace since the first quarter of 2023. This growth was boosted by a 6% surge in consumption of goods and a robust spending on services, particularly prescription drugs, motor vehicles and parts, outpatient services, and food services and accommodations. Business investment also contributed significantly, with equipment investment soaring 11.1% and investment in intellectual property products remaining robust. However, residential investment likely decreased significantly, and net trade had a negative impact on growth due to rising imports.



Government spending, particularly defense spending, played a significant role in the acceleration of US economic output in the third quarter of 2024. According to the BEA, government consumption expenditures increased by 5% in the third quarter, led by a robust 10.2% surge in defense spending. This increase contributed to the overall growth in GDP, which expanded at an annualized rate of 2.8% in the quarter. The rise in defense spending can be attributed to various factors, including increased investment in military equipment and infrastructure, as well as higher spending on research and development. This growth in government spending, coupled with strong consumer and business spending, helped drive the US economy to its fastest pace in nearly three years.

Consumer confidence and business sentiment play a significant role in driving spending and investment decisions. In the US, the Conference Board's Consumer Confidence Index (CCI) and the National Federation of Independent Business's Small Business Optimism Index (SBOI) are key indicators of these sentiments. In 2024, both indices showed improvements, reflecting a more optimistic outlook among consumers and businesses. The CCI rose from 125.8 in Q1 to 131.4 in Q4, while the SBOI increased from 94.5 to 97.5 over the same period (Source: The Conference Board, NFIB). This boost in confidence led to increased consumer spending, which accounts for about 70% of US GDP. Additionally, businesses responded to the improved sentiment by investing more in equipment and intellectual property products, contributing to the robust economic growth in Q4 2024.

In conclusion, the US economy ended 2024 on a strong note, with economic output growing at the fastest pace in nearly three years. This growth was driven by a surge in consumer spending and business investment, as well as increased government spending, particularly in defense. As consumer confidence and business sentiment continue to improve, the US economy is well-positioned for further growth in the coming years. Investors should monitor these trends and consider allocating capital to sectors that are likely to benefit from the continued expansion of the US economy.