A third and final estimate from the US Bureau of Economic Analysis showed the US economy grew at a slightly faster pace in the third quarter than in the second quarter. Despite tight financial conditions, the US economy has been relatively strong, aided by a resilient consumer. This has helped keep the US Federal Reserve Board (Fed) from aggressively lowering interest rates. At its December meeting, the Fed raised its outlook for economic growth for this year and next, which has helped push back its expectations for the number of rate cuts next year. 

• The US economy expanded by 3.1%, annualized, in the third quarter of 2024. A second estimate said the economy grew by 2.8%. Third-quarter growth was the fastest since the fourth quarter of 2023.
• The resilient consumer was the main driver of growth over the quarter. Personal consumption rose at an annualized pace of 3.7%. US consumers have shown their resiliency despite tight financial conditions. This strength has contributed to elevated inflationary pressures.
• Fed officials now expect only two rate cuts next year. Relatively strong economic conditions will force the Fed to take a gradual approach to lowering interest rates. The Fed doesn’t want to stimulate the economy too much and have inflation move higher.
• Another area the Fed is monitoring is the real estate market. Existing home sales in the US rose 4.8% to 4.15 million in November, the highest level in eight months.

The world’s largest economy continues to grow at a relatively strong pace despite tight financial conditions. This has given the Fed pause from lowering interest rates too quickly. The strong US economy has helped prop up global economic activity. However, there are plenty of risks, including geopolitical tensions and potential tariffs, that could hinder global growth in 2025.

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