December 31, 2024: How the U.S. Economy Surprised Again in 2024

Since the U.S. Federal Reserve began hiking interest rates in March 2022, economic forecasters, Wall Street strategists, and Federal Reserve officials had anticipated the U.S. economy to slow—if not fall into outright recession. Instead, the economy accelerated and outperformed the cognoscenti’s forecasts.

This year has been no exception. One year ago, Federal Reserve officials estimated the U.S. economy to grow at an inflation-adjusted rate of about 1.5% over the course of this year. The consensus among economists at major banks called for even slower growth of 1.2%. Although we will not know official 2024 GDP for another month, the economy appears to have expanded by about 3% in inflation-adjusted terms in 2024—again defying expectations.

One can point to several reasons to explain the economy’s surprising resilience, such as low household debt-burdens or generous U.S. fiscal policy. But a simpler explanation is this: U.S. consumers held up and continued to consume. Stable wage gains and falling inflation helped restore consumers’ purchasing power—and thus kept alive the central engine of U.S economic growth.

Weekly Market Update: December 31, 2024

Sarina Yoo, “SURVEY REPORT: US Economic Forecasts in Dec. 2023.” Bloomberg. December 22, 2023. Chris Middleton, “US Federal Reserve’s Economic Projections (Table).” Bloomberg. December 13, 2023.