The United States economy managed to defy recession fears in 2023 and made considerable progress toward a soft landing. Kavan Choksi Business Consultant mentions that even though stronger than expected GDP growth has been a surprise, it did not prevent the labor market from continuing to rebalance or inflation from continuing to fall. The US GDP is expected to grow 1.8% in 2024 on a Q4/Q4 basis, and beat the low consensus expectations.
Kavan Choksi Business Consultant talks about United States 2024 economic outlook
The Federal Reserve has made substantial progress in terms of lowering inflation while also maintaining growth in the U.S. economy in 2023. Interest rates, however, are historically high, even though inflation has trended lower over time. There is a chance of economic fallout from the Fed’s tight monetary policy measures in 2024. Investors in the country have hopes that the Fed shall be able to navigate a soft landing for the U.S. economy and avoid a severe recession in 2024. But inflation still remains above the Fed’s 2% long-term target. Hence, many economists are divided on whether the Federal Reserve might have just delayed an inevitable recession.
The Fed itself projects that its monetary policy tightening measures are likely to weigh on U.S. economic growth in 2024. However, fortunately, the Fed has also modified its economic projections and does not any longer anticipate a U.S. recession. Even though the risk of a major recession declined in 2023 itself, it is anticipated that the interest rates shall stay higher for longer than optimistic Americans had hoped.
Asper Kavan Choksi Business Consultant says that investors looking ahead to 2024 must maintain a cautious approach to their finances due to sticky inflation, delayed negative economic impact from the Fed’s aggressive rate hikes, as well as potential for a slowdown in gross domestic product growth. Even though the U.S. economic outlook has improved throughout 2023, it does not mean the economy is in the clear heading into 2024.
The United States recorded 2.2% GDP growth in the first quarter of 2023, and 1% growth in its second quarter. The Fed expects the economy to maintain this growth pace in the second half of 2023, thereby forecasting full-year GDP growth of 2.1%. As per recent Fed projects, GDP growth may slow down to 1.5% in 2024.
The labor market of the United States remains mostly resilient heading into the end of the year. The unemployment rate in the nation has gone up to 3.8%. The Federal Open Market Committee projects the unemployment rate of the nation shall average 4.1% in 2024, which is still well below its long-term average of around 5.7%.
The COVID-19 pause on student loan payments ended in October, thereby placing an extra financial burden on several thousands of Americans. Therefore, it is projected that real U.S. consumer spending will drop 1.1% in the first quarter of 2024 and decline 1% in the second quarter annually. Softening consumption, along with rising interest rates, has high odds of weighing on U.S. business investment in early 2024.