{"id":13588,"date":"2024-12-11T20:11:32","date_gmt":"2024-12-11T20:11:32","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=13588"},"modified":"2024-12-11T20:11:32","modified_gmt":"2024-12-11T20:11:32","slug":"will-a-hot-economy-in-2025-trigger-inflation","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/will-a-hot-economy-in-2025-trigger-inflation\/","title":{"rendered":"Will A Hot Economy In 2025 Trigger Inflation?"},"content":{"rendered":"\n<p><em>Greg I. from Denver, CO asks: <\/em>Hello Mitch, There\u2019s quite a bit of anticipation that the economy could shift into a higher gear with lower taxes and deregulation in the new year. My question is actually about inflation. Do you think there\u2019s a risk of the economy running too hot, which could drive prices higher and then ultimately lead to higher interest rates? Thank you.<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thanks for writing, Greg. Theoretically speaking, the answer to your question is a simple \u2018yes.\u2019 Cutting taxes, slashing regulation in various parts of the economy, and implementing wide-ranging tariffs could all be inflationary. The right question to ask here, however, is what these policies will look like if or when they\u2019re enacted. Tax cuts require congressional approval and will involve negotiation, deregulation efforts will be challenged in the courts, and tariffs have historically been used by the Trump administration as negotiating tactics.<\/p>\n\n\n\n<p>Whether or not these policies lead to an acceleration of growth in the U.S. economy remains to be seen. But the general spirit of the agenda I think could lead to more expansion, especially given that the economy is already on a strong footing.<sup>1<\/sup><\/p>\n\n\n\n<p>Looking at your question in a different way, we could ask if there is a way the U.S. economy could accelerate <em>without <\/em>spurring an uptick in inflation. To which, I think the answer is yes, via gains in productivity.&nbsp;<\/p>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_12_11_2024&amp;content=spending_in_retirement\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_12_11_2024&amp;content=spending_in_retirement\">Start the New Year with Confidence: Secure Your Retirement Strategy<\/a><\/u><\/strong><\/p>\n\n\n\n<p>Retirement is your time to embrace freedom, pursue passions, and create cherished memories. But to make the most of this chapter, a strong financial plan is key to ensuring your savings last as long as you need them.<\/p>\n\n\n\n<p>That\u2019s why we\u2019ve crafted a free guide just for you: <em>4 Strategies for Spending Money in Retirement<\/em>. Inside, you\u2019ll find actionable advice tailored to help you maximize your nest egg and enjoy peace of mind. Highlights include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Smart Spending Made Simple: Navigate tax-efficient withdrawals with clarity.<\/li>\n\n\n\n<li>The 4% Rule Demystified: A timeless approach to maintaining a steady income.<\/li>\n\n\n\n<li>Dynamic Spending Strategies: Learn how the 5% rule adapts to your lifestyle.<\/li>\n\n\n\n<li>And much more&#8230;<\/li>\n<\/ul>\n\n\n\n<p>If you\u2019ve saved $500,000 or more for retirement, don\u2019t miss this opportunity to protect your hard-earned wealth. Download your guide today and take the first step toward a more secure, confident retirement.<br>\u00a0<br><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_12_11_2024&amp;content=spending_in_retirement\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_12_11_2024&amp;content=spending_in_retirement\">Download Zacks Guide, <em>4 Strategies for Spending Money in Retirement<sup>2<\/sup><\/em><\/a><\/u><\/strong><\/p>\n\n\n\n<p>In 2024, quarterly productivity in the U.S. has grown by at least 2% year-over-year, with productivity gains notched over the past five quarters. As seen in the chart below, the steady gains in productivity are consistently higher than what\u2019s been experienced in the previous decade, excluding the immediate post-pandemic rebound\u2014when low productivity jobs like food service were slow to come back online.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"347\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/pic1-2-1024x347.png\" alt=\"\" class=\"wp-image-13589\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/pic1-2-1024x347.png 1024w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/pic1-2-300x102.png 300w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/pic1-2-768x260.png 768w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/pic1-2.png 1320w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p><strong><em>Source: Federal Reserve Bank of St. Louis<sup>3<\/sup><\/em><\/strong><\/p>\n\n\n\n<p>The productivity gains in the U.S. are notable for their contrast to other developed economies like Europe and Canada, where productivity has grown by less than 1% on average over the last decade. The pandemic may have played a key role in this divergence. In America, workers were greatly reshuffled following the pandemic, with many switching jobs or taking up opportunities to work remotely, in higher responsibility roles where they could be more productive.<\/p>\n\n\n\n<p>Another key difference between the U.S. and the rest of the world: entrepreneurship. In the post-pandemic period, there was a significant surge in new business formation in the U.S., especially in technology-driven fields\u2014where business often happens more efficiently. Small businesses tend to make decisions more quickly and embrace fast growth, which drives productivity on a larger scale.<\/p>\n\n\n\n<p>So, getting back to your question about whether the economy can heat up with causing a resurgence in inflation, I think the answer is yes, if we see significant productivity gains alongside the new growth. If we can increase the productive capacity of the economy without too much overheating in the labor market, I think we can avoid an inflation event.<\/p>\n\n\n\n<p>As you consider what could happen in the new year with inflation and regulatory policy, you may also want to take a closer look at your retirement plan and how it could be impacted. Smart planning today can help you navigate these changes confidently and ensure your savings remain secure.<\/p>\n\n\n\n<p>That\u2019s why we\u2019re offering our exclusive guide, <em>4 Strategies for Spending Money in Retirement.<\/em> This resource is designed to help you make informed decisions so you can focus on enjoying your retirement without worrying about running out of money.<\/p>\n\n\n\n<p>Inside, you\u2019ll discover:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>How to Optimize Your Withdrawals:<\/strong> Master the art of tax-efficient spending.<\/li>\n\n\n\n<li><strong>Proven Income Rules:<\/strong> The 4% rule and 5% rule explained in detail.<\/li>\n\n\n\n<li><strong>Strategies to Protect Your Nest Egg<\/strong>: Ensure your savings work for you over time.<\/li>\n\n\n\n<li>And more\u2026<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and are ready to learn more, click the link below to get your copy today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Mitch looks at the economy&#8217;s potential shift to a higher gear in 2025, and whether gains in productivity may help avoid inflation and higher interest rates. <\/p>\n","protected":false},"author":3,"featured_media":13575,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-13588","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13588","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=13588"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13588\/revisions"}],"predecessor-version":[{"id":13590,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13588\/revisions\/13590"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media\/13575"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=13588"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=13588"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=13588"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}