US economy concluded 2024 on a strong note, with PMI Services finalized at 56.8 in December, up from 56.1 in November and marking a 33-month high. Although below the preliminary estimate of 58.5, the services sector’s robust performance overshadowed the ongoing weakness in manufacturing. PMI Composite also rose to 55.4 from 54.9 in the prior month, confirming solid growth momentum.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, highlighted that “Business activity in the vast services economy surged higher in the closing month of 2024 on fuller order books and rising optimism about prospects for the year ahead”. The sector’s strength has buoyed GDP growth, which is expected to remain “robust” after registering a 3.1% expansion in Q3 2024.
Optimism is partly tied to expectations of business-friendly policies under the incoming Trump administration, including potential tax reforms, deregulation, and selective tariffs aimed at supporting domestic industries. Such measures have bolstered sentiment among service providers, with many forecasting faster growth in 2025.
However, Williamson cautioned that the economy’s current momentum might make Fed policymakers hesitant to aggressively lower interest rates. Financial services, in particular, have played a critical role in late 2024’s economic performance, fueled by expectations of lower borrowing costs. The challenge in the months ahead will be balancing continued economic growth with the potential fallout from a changing interest rate outlook.
