With Good Holiday Sales
* Growth was slight to moderate at the end of 2024, according to the Beige Book. All twelve districts reported growth.
* Consumer spending growth continued to increase.
* Interest-rate sensitive construction and manufacturing remained soft.
* The outlook for 2025 was positive.
* Employment continued to increase at the end of the year.
* Inflation was modest.
* PNC expects continued expansion but slower economic growth this year.
According to the latest Beige Book from the Federal Reserve, covering late November and December, economic growth at the end of last year was slight to moderate across the United States. Consumer spending increased moderately, and holiday sales came in better than expected. Vehicle sales growth was modest. There was slight growth in nonfinancial services, with continuing gains in travel and tourism, especially air travel.
Construction activity fell, with drags from high materials costs and interest rates. Residential real estate was flat, restrained by continued high mortgage rates, while commercial real estate sales rose. There was a slight contraction in manufacturing, and some firms reported increasing inventories ahead of potentially higher tariffs.
There was modest growth in lending and no change in credit quality, although there was some apprehension about delinquencies among lower-income households and small businesses.
The outlook for 2025 was generally positive, although there were concerns about potential restrictions on immigration and higher tariffs.
Employment was up modestly, with half of the districts reporting a slight increase and half reporting no change. Healthcare stood out as a source of labor demand. It remained difficult to find skilled workers and layoffs remained low. There was greater uncertainty about future labor demand. Wage growth strengthened to moderate in most districts, although there were also reports of easing wage pressures.
Prices on average increased modestly in late 2024, with some prices flat or down. Contacts expected further price increases in 2025, with uncertainty about the impact of higher tariffs.
There was slight growth in the Boston, New York, Philadelphia, Chicago, St. Louis, Minneapolis, Kansas City, and San Francisco districts, with modest growth in the Cleveland, Richmond, and Atlanta districts. Growth was moderate in the Dallas district.
The latest Beige Book is consistent with PNC’s forecast for slower but still-solid economic growth in late 2024 and early 2025. Strong consumer spending continued to lead growth at the end of 2024, with holiday sales besting expectations as the strong labor market supported consumer purchases. Despite recent fed funds rate cuts, high interest rates remain a drag on manufacturing and real estate in particular.
With the new administration set to take office next week there is a great deal of uncertainty about the outlook, particularly around tariffs and immigration. But the view on 2025 is generally positive. After inflation-adjusted GDP growth of around 2.5% in 2024, PNC expects somewhat softer growth this year, with real GDP up around 2%. Slower growth in consumer spending and a reduced contribution from government will weigh on overall growth. How much inflation slows this year will depend on the extent of higher tariffs.
PNC Bank, National Association, is a member of The PNC Financial Services Group, Inc. (NYSE: PNC). PNC is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management.
