US: experts have significantly reduced their growth estimates

Economists have predicted that the average rate of growth would be 2.2% in 2024, which is twice as fast as what was anticipated six months ago.

This is a significant increase over the previous projection. In spite of the fact that a slowdown is projected to occur throughout the course of the year, growth drivers may be prompted by the gradual fall in interest rates.

Is it possible that the economy of the United States of America will once again break with the predictions? In light of the fact that economists had forecasted a moderate growth rate for this year, they have now made a major upward revision to their projection for the year 2024. This week, Jerome Powell, the Chairman of the Federal Reserve, made a statement in which he indicated that “recent indicators suggest that economic activity has expanded at a sustained pace.”

A other point to consider is that members of the monetary policy committee, which is in charge of determining interest rates, “have generally revised their growth projections upwards since December.” Compared to the average growth of 2.5% that they expected for the previous year, the median growth prediction for this year has improved from 1.4% to 2.1% in just three months. This is in contrast to the growth projections that they made for the previous year.

Additionally, all of the economists who were surveyed by the Bloomberg agency are in agreement with one another, and they are now forecasting that the average growth rate for this year will be 2.2%, which is twice as strong as their projections from six months ago. This is a significant improvement from the previous forecasts that they had made.

“At the end of the previous year, the economy exceeded expectations, and it entered the year 2024 with a lot of momentum on consumption, which favors the annual average forecast for 2024,” according to Lydia Boussour, an economist in senior positions. “This situation is favorable for the forecast for 2024.” The entire distance to the EY Parthenon. As a result, consumers and businesses were less sensitive to fluctuations in interest rates than one may have assumed they would be. In fact, a significant number of them refinancing their debt at lower rates than they had originally anticipated.

There has also been some support provided to the labor market, which has been impeded for a considerable amount of time by a shortage of workers. “The strong job creation [265,000 net job creations per month on average over the last three months, Editor’s note] was accompanied by an increase in the supply of workers, with the increase in the participation of people from 25 to 54 years old and maintaining a high rate of immigration,” Jerome Powell pointed out. It is important to note that this increase occurred simultaneously with the strong job creation. “The strong job creation was accompanied by an increase in the supply of workers.” Consequently, Joe Biden is confronted with a political issue as a consequence of the massive flood of migrants at the border with Mexico; nevertheless, this is not a challenge that pertains to the economy.

Furthermore, Wall Street, which has established new benchmarks by betting on the prospect of future rate reductions and riding the wave of the promises of artificial intelligence, is indirectly promoting activity. This is because Wall Street has previously established new benchmarks. “We doubt that significant amounts of excess savings accumulated during the pandemic will still serve spending when 2024 rolls around,” the analysts at Goldman Sachs said. However, they did forecast that the recent recovery in asset values will provide a good boost to spending growth in 2024. This is according to the experts’ predictions.

The researchers point out that “despite the drop in spending in February, we continue to view consumption as a source of strength and forecast real growth in spending above consensus, at 2.2% in 2024.” Despite the fact that consumption is responsible for two thirds of GDP, this is the overall situation.

According to Lydia Boussour, the outlook for the coming year is still one of a gradual slowdown and normalization of the situation. She makes this comment. According to the economist’s assessment, “the job market is rebalancing, wage growth is moderating, and we expect the pace of growth to slow down over the course of the year, reaching growth of approximately 1.5% year-on-year by the end of the year.”

In addition, she mentions that despite the fact that inflation is diminishing, consumers are still presented with high prices, which have increased by twenty percent in contrast to the period of time before the pandemic. In addition, Goldman Sachs forecasts that the rate of new job creation will decrease starting in the year 2024, with the number of new jobs being created each month falling to about 175,000 net creations.

The Federal Reserve has predicted that interest rates will remain at historically high levels, with the average rate hitting 4.6% at the end of the year and an additional 3.9% at the end of 2025. This is according to the median estimates of the Federal Reserve organization.

Nevertheless, the gradual deterioration of these elements ought to be the catalyst that sets off growth drivers. “Over the course of the past year, activity in the housing sector has been moderate, primarily due to high mortgage rates,” the president of the financial institution recalled. “This decline in activity can be attributed to various factors.” Another possibility is that the level of corporate investment would progressively increase in the year 2025.

A further announcement was issued by the Federal Reserve, which stated that it would soon cut the rate at which it was “quantitatively tightening” (QT) in order to avoid “stressing” those individuals who were searching for additional liquidity. “It is quite ironic to think that by going slower, you can go further, but that is the idea,” Jerome Powell said in a succinct description of the concept. “But that is the idea.” The chance of liquidity issues, which can develop into shocks and cause you to halt the process, is considerably reduced when the transition is carried out without any disturbances. This has the effect of reducing the likelihood of this happening.

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