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Breaking Flooring News

U.S. Economy Poised for Solid Growth in 2025 Despite Rate Pressures

By FLOOR Trends & Installation Editors
NRF Logo
January 8, 2025

The U.S. economy is positioned for another year of healthy growth in 2025, building on strong performance in 2024 despite persistent headwinds from inflation and high interest rates, according to the National Retail Federation's chief economist.

In the January edition of NRF's Monthly Economic Review, Jack Kleinhenz highlighted the economy's remarkable resilience, noting that 2024 GDP growth is tracking at 2.7%, significantly above historical averages. He projects 2025 growth between 2% and 2.5%, though he emphasized the forecast's uncertainty given various policy factors in play.

"The U.S. economy ended 2024 on a high note and the outlook looks promising for 2025," Kleinhenz said. "Recent performance shows the economy is on solid footing and has been growing at a steady pace and above its historical average."

The positive outlook is anchored by robust consumer spending, which has remained strong despite earlier concerns about inflation's impact. Core retail sales, excluding auto dealers, gas stations, and restaurants, rose 4% year-over-year through November 2024, with holiday shopping season numbers expected to meet or exceed projected growth of 2.5% to 3.5%.

Labor market strength continues to underpin consumer resilience. Unemployment claims remain near historical lows, with just 1.8 million ongoing claims as of late December 2024. Wage gains have outpaced inflation, with average hourly wages up 4.4% on an annualized basis in November, while inflation, as measured by the Personal Consumption Expenditures Price Index, moderated to 2.4%.

Consumer sentiment has also shown improvement, rising for five consecutive months to reach 74 in December – its highest level since April 2024. This comes despite persistent concerns about high prices, particularly in the service sector.

Looking ahead, Kleinhenz identified several factors that could influence economic performance in 2025, including potential changes to trade, immigration, regulation, tax, and spending policies. The Federal Reserve's monetary policy will also play a crucial role, with officials now indicating they expect to cut rates by only half a point in 2025, down from earlier projections of a full percentage point reduction.

"The resilience of the U.S. consumer should hopefully remain part of the dominant narrative," Kleinhenz said, while cautioning that the range of uncertainty for 2025 growth projections remains wide.

The forecast comes as retailers navigate a complex economic landscape, balancing consumer demand with ongoing inflationary pressures and evolving shopping patterns. The NRF's analysis suggests that while challenges persist, the fundamental drivers of economic growth remain intact heading into 2025.

KEYWORDS: financial insights

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