U.S. ECONOMY– SLOWER GROWTH IN 2024 AS RECESSION ODDS FALL Consumers, businesses, and policymakers are increasingly optimistic that the economy will again avoid a recession in 2024. Inflation is trending towards 2%, allowing policymakers to perhaps ease interest rates in the second half of the year. That doesn’t mean economic success will be easy in 2024. We expect consumer behavior to adjust to the new reality of higher interest rates, tighter financial conditions and stretched access to credit. We anticipate a drag from world conflicts and disrupted global supply chains. In short, while the probability is increasing that 2024 will bring slower growth and easing inflation pressures, it is too soon to celebrate 2024 as a year without disruption. 2024 U.S. ECONOMIC OUTLOOK KEY TAKEAWAYS FOR 2024
DRIVERS OF ECONOMIC GROWTH IN 2023 U.S. real GDP growth in 2023 was driven by consumer purchases and business investments
• For job seekers, the job market will be a little harder to navigate with fewer job openings; the unemployment rate is expected to rise to 4.5% by the end of the year. • Consumers feel more optimistic about the future but are constrained now by higher interest-rate debt; consumer spending slows in 2024 leading to slower U.S. economic growth. • Falling housing prices and rents will lead inflation lower and allow the Federal Reserve to begin to cut interest rates in the second half of the year. • The risks to the economic outlook are still tilted to the downside, but those risks are better understood and seem contained to, at worst, a short and shallow recession.
6%
4.9%
5%
4%
3%
2.6%
2.5%
2.3%
2.1%
2.1%
1.7%
2%
0.9%
0.8%
1%
0.6%
0.6%
0%
-1%
Consumption Investment Real GDP
-1.7%
-2%
-3%
22 QIV
23 QI
23 QII
23 QIII
Source: Bureau of Economic Analysis
2022 QIII
2022 QIV
2023 QI
2023 QII
2023 QIII
INDICATORS (Y/Y PERCENT CHANGE)
2023 QIV(E)
2024 QI(F)
2024 QII(F)
2024 QIII(F)
2024 QIV(F)
2.66% 2.57% 2.24% 2.06% 4.9%
U.S. REAL GDP
1.10% 0.70% 0.65% 1.10% 1.48%
3.53% 3.57% 3.50% 3.57% 3.7%
U.S. UNEMPLOYMENT RATE
3.73% 4.00% 4.20% 4.26% 4.27%
2.56% 4.10% 4.65% 5.08% 5.3%
U.S. FED FUNDS RATE
5.33% 5.38% 5.25% 5.13% 4.75%
5.21% 5.09% 4.84% 4.58% 3.8%
U.S. CORE PCE INFLATION
2.90% 2.70% 2.50% 2.30% 2.20%
14
2024 ECONOMIC OUTLOOK
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