On January 5th, in Manhattan, New York, pedestrians navigate their way across a bustling crosswalkThis scene captures a moment of everyday life in one of the most iconic cities in the worldAs we reflect on the economic landscape of the United States in 2024, it is evident that this is a year marked by a multitude of challenges and opportunities that could shape the path ahead for the nation.

The economy in the United States, despite experiencing modest growth, is fraught with complexitiesPersonal consumption expenditure (PCE), the primary driving force behind the nation’s gross domestic product (GDP), continues to show stable growthData from the U.SBureau of Economic Analysis reveals that real GDP growth in the first three quarters of 2024 was recorded at rates of 1.6%, 3.0%, and 2.8% respectivelyThe contributions from PCE were significant, accounting for 1.3, 1.9, and 2.4 percentage points to GDP growth in these periods

Additionally, the personal disposable income (DPI) has been on an upward trend, suggesting a resilience in consumer spendingHowever, as the growth rate of real DPI starts to decelerate, experts warn that the cushioning effect of consumer expenditure on the economy may diminish in the quarters to comeThe Atlanta Fed's projections indicate that the anticipated growth rate for real GDP in the fourth quarter is around 3.1%, but PCE’s role in driving this growth is expected to wane.

In another arena, private fixed investment (PFI) is showing signs of slowdown as the number of new business establishments has been decliningAccording to data from the Bureau of Economic Analysis, the quarter-over-quarter growth rates for PFI in the first three quarters of 2024 were 1.6%, 0.6%, and 0.4%. Moreover, data from the U.SCensus Bureau indicates a consistent decline in the establishment of new businesses since September 2023, plummeting to 424,000 new establishments by May 2024. Despite some fluctuations in the latter half of 2024, the overall trend remains downward when compared to the same period in 2023. This decline is corroborated by the Chief Executive Officer Confidence Index, which reflects persistent low evaluations of the business environment by entrepreneurs throughout the year, with a slight improvement noted in December.

As for international trade, both imports and exports are experiencing moderate increases, but the trade deficit is continuously widening

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The Department of Commerce reports a total goods trade amounting to $444.76 billion from January to October 2024, marking a year-over-year increase of 3.5%. Exports and imports rose separately by 1.7% and 4.7%, respectivelyThe total service trade also saw a remarkable 8.0% increase over the same periodDespite this rise, the overall trade deficit combined with service trade surplus results in a worrying expansion of the trade gap, totaling $735.9 billion, up by 12.3% from the previous year.

The manufacturing sector is currently grappling with contraction, as indicated by the Purchasing Managers' Index (PMI), which only breached the expansion threshold in March 2024. For most months, it lingered below the critical mark of 50, indicating a challenging environment characterized by softening demand and sluggish output growthThe only sectors achieving expansion recently are the food, beverage, tobacco products, and computer and electronic products industries

Furthermore, average capacity utilization rates are falling, with the manufacturing rate averaging 76.88% from January to October 2024, considerably below historical averages from 1971 to 2022.

The labor market paints a relatively stable picture, with the unemployment rate oscillating between 3.7% and 4.3% throughout the yearThis indicates a sustained period during which unemployment remained below the natural rateHowever, the labor participation rate is still lagging behind pre-pandemic figures, suggesting that while the economy is performing adequately, not all segments of the population are reaping the benefitsMoreover, the non-farm payroll data has exhibited volatility, with notable fluctuations in job additions, predominantly in healthcare and hospitality during the latter months of the year.

While inflation rates have begun to fluctuate, their decline appears to be slowing, leaving many consumers feeling uncertain about price stability

The Consumer Price Index (CPI) indicates a more tempered descent in inflation in 2024, with certain months experiencing bumps in ratesIt’s important to note that, as of November, the sticky core CPI was up 3.87% year-over-year, indicating persistent price pressures that are expected to lingerExpectations for future inflation remain cautious, with recent surveys suggesting a 2.6% forecast for the coming year.

The federal budget deficit has reached alarming levels, with total federal debt hitting a historic highThe Treasury reports that for the fiscal year 2024, federal income and expenditures stood at $4.92 trillion and $6.75 trillion, respectively, resulting in a staggering deficit of $1.83 trillionMain contributing factors to this burgeoning deficit include increased spending on social security programs, military expenditures, and surging interest on existing debtThe relentless rise in federal debt, surpassing $36 trillion, poses significant strains on fiscal policy and presents a mounting challenge to economic growth.

Looking ahead towards 2025, significant attention must be directed towards the new administration's policies regarding immigration, tariffs, taxation, and energy