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US Economy 2024: Key Points to Know – Will It Rise or Face a Downfall?



US Economy 2024 Key Points to Know - Will It Rise or Face a Downfall

US Economy 2024: According to Kevin Kliesen, a business economist and research officer at the Federal Reserve Bank of St. Louis, economic conditions are supposed to deteriorate modestly by 2024.

However, real GDP growth and job growth are expected to remain positive, and inflation will go down to around 2.5%. Having such an outcome would validate those who’ve long believed a soft landing is possible.”

Fed policy is expected to shift from the rapid rise in interest rates that characterized the last 18 months, as the central bank hinted at in its December meeting. Meanwhile, inflation is predicted to slow down in 2024 after a surge in 2022.

That’s not to say economists think inflation and interest rates will go back to pre-pandemic levels.

The interest rate will stay above inflation, says Andrew Patterson, senior international economist at Vanguard. There’s no going back to ultra-low interest rates. We’re more convinced than we were a year ago.”

In other words, savers will get rewarded for their prudence, and long-term investing could return after a few years of momentum stocks. We’ll be living in a sound money era for a while, with savers earning positive real returns and borrowers weighing capital costs carefully.”

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For most Americans, inflation will moderate in 2024. Consumer prices spiked to 9% inflation in mid-2022, then fell to around 3% and are expected to drop further next year to the mid-2% range or lower.

Prices will still rise, but at a rate more in line with pre-pandemic levels. Even if interest rates settle at a higher level than before COVID-19, they’re on the downward trajectory.

“We expect a strong expansion with robust employment and falling inflation, but we’re expecting a modest expansion near 1%,” said RSM US economists.

The key question in gauging the US economy 2024 is if something similar to 2008 will happen again. Although the commercial real estate market and regional banks are having serious problems that could lead to a credit crunch, the Fed sticks to its high interest rate mantra to keep inflation under control.

Meanwhile, Jerome Powell’s press conferences and Fed policy statements don’t mention the financial system’s risks to the economy.

The US economy 2024 will be just as unpredictable as the one in 2023.

How’s the US economy 2024 and job growth looking? Here’s what’s going on with inflation and interest rates

Post-COVID-19, the US economy was supposed to finally fall into recession this year.

Stocks are roaring thanks to the growing belief that the Federal Reserve will manage inflation without causing a downturn, known as a “soft landing.”

Growth is expected to slow amid the Fed’s aggressive interest rate hikes, household savings being depleted from the pandemic, and government spending cutting back.

Inflation is likely to ease further to or near the Fed’s 2% goal, and the central bank is tentatively planning to cut interest rates more sharply than expected, forecasters say.

The year 2023 was a good one, says Moody’s Analytics’ Mark Zandi. “2024’s going to be great.”

Are interest rates going to go down in 2024?

Recent developments have brightened the outlook. Probably done raising rates to fight inflation, the Fed plans three rate cuts in 2024 to lower borrowing costs for consumers and businesses. Fed’s turnabout has been validated by lower inflation than expected.

The stock market soared higher after the Fed’s pivot, which was already surging because of an improved inflation picture.

“Like pouring gasoline on a fire,” Scott Anderson, BMO’s chief economist, said.

What’s the economy like in 2024?

According to a survey by Wolters Kluwer Blue Chip Economic Indicators, economists predict the economy will grow 1.3% this year, down from 2.4% in 2023. The Fed’s further cuts to interest rates should lead to stronger output by fall as the first half of the year ends.

By the end of 2024, unemployment is projected to rise to 4.2%, well below economists’ 4.8% estimate a year ago.

Wolters Kluwer poll was done in early December before Fed news on Dec. 13.

There have been some revisions to top economists’ estimates since then. Moody, chief economist at Regions Financial, bumped up his GDP growth forecast to 1.9% from 1.6%. But Zandi said he always believed inflation would decline and the Fed would shift its stance.

Just under 2% GDP growth isn’t robust, but it’s close to the decent 2% average in the decade before the pandemic. Companies will lower prices and employees will accept smaller pay raises if the US economy 2024 cools dramatically.

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As monetary policy takes a toll and post-pandemic tailwinds fade, growth will slow in 2024.

Real GDP growth should be somewhere between an expansion and contraction for much of next year, also known as a soft landing. We forecast a below-trend 0.7% real GDP growth in 2024 after a 2.8% growth in 2023.

In 2023, consumer spending could rise at a slower pace, while fiscal spending could go from a positive contributor to a modest drag. Business investment and housing activity dropped in 2023, but the outlook for 2024 remains muted amid higher interest rates; 2023 services strength will weaken.

Since the hiking cycle is over, we’ll leave the Fed Funds rate at 5.25%-5.50% until mid-2024.

Inflation is likely to moderate over the next few quarters, so we expect the FOMC to slowly normalize policy rates. Starting in June, we predict 25 bps cuts, bringing the Fed Funds target range to 4.00%-4.25% by 2024.

The Fed’s balance sheet runoff program, quantitative tightening, will also continue through 2024. Quantitative tightening is expected to drain $1 trillion from the economy next year at $95 billion a month.

During the past 18 months, housing activity has dropped 30%-40%.

The U.S. housing market is effectively frozen with housing affordability at a 40-year low, and 75% of mortgages locked at 4% or below. Residential real estate investment has fallen 12% seasonally adjusted over the last six quarters.

While supply was tight and vacancies were at historically low levels, home values rose 6% in 2023. Even if trends remain soft in the near term, we think the housing market could perform better in 2024 than in 2023, given the already huge drop in recent years.

The risks are there for a moderately positive forecast for 2024. Most people were surprised by the U.S. economy in 2023. It will be interesting to see how the US economy 2024 performs.

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