Zions Bank Economist Robert Spendlove has given a prediction that the economy will be off to a strong start in 2025, despite policy uncertainty. Recently, Spendlove stated that by most measures, the United States economy is closing out the 2024 year stronger than it began.
It may not seem so, but inflation is down and consumer confidence has risen. It was also stated that economic growth outpaced expectations, which is a strength that is expected to carry into the new year. However, uncertainty does persist regarding how potential policy changes might impact the economy with a new Presidential Administration and Congress.
Four major points that Spendlove touched on were:
- Interest rates could drop more slowly
- The job market may soften slightly
- Stubborn inflation set to stick around
- Confident consumers could step up spending, fueling growth
Spendlove explained that the Federal Reserve cut its short-term benchmark interest rate three consecutive times in the 2024 year, which amounted to a full percentage point drop from the months of September to December. The reserve is reported to have plans to slow that pace of further rate drops in 2025 with an expected two rate cuts for the year.
For the job market, Spendlove shared that the overheated labor market cooled in 2024, but job growth remained solid. The United States and Utah itself saw a slight uptick of unemployment rates, though it remained at decent levels. For 2025, the unemployment rate in Utah is expected to remain in its current range.
Although inflation has dropped significantly over the past 2 1/2 years, Spendlove said that consumers continue to feel the high prices. Wages will need to grow faster than prices do for a sustained period of time to regain the purchasing power that was lost to inflation. In the last half of 2024, Spendlove reported that inflation was “sticky” and it may take until 2026 or 2027 to reach its 2% target.
Additionally, it was stated that economic policy could impact whether the inflation rate will continue a downward trajectory.
Finally, Spendlove shared that while changes in the federal government creates a level of economic uncertainty, confidence by consumers is up regionally, and even nationally. If the positivity continues, the high level of consumer confidence may spur retail spending and fuel economic growth.