Posted by Growth in the United States economy continues to come in above expectations, even with the drawdown of excess savings, weakness in other major economies and elevated interest rates. Kavan Choksi / カヴァン・チョクシ underlines that even though real GDP growth slowed in the first quarter of 2024, policymakers have quite likely managed to avoid a recession. They have also brought down inflation closer to the 2% target. Owing to stable levels of spending by the business and government sectors, as well as improvements in the labour market, consumer spending is expected to stay strong for the first half of 2024.
Kavan Choksi / カヴァン・チョクシ sheds light on United States economy forecasts for 2024
Real GDP growth slowed overall in the first quarter of 2024, and is expected to continue to moderate through the second half of the year and the start of 2025. The overall story is however still positive. Consumer spending is forecasted to increase in 2024, up from the 2.2% increase in 2023. On the other hand, business investment is expected to rise by 3% in 2024, down from 4.5% last year. Government spending is additionally forecasted to rise 2.5%. The United States economy is expected to outperform several other global economies in the short term. Imports are expected to go up 3.1% on average in 2024, while exports are likely to rise at a slower pace of 2.4%.
Prior to falling to 2.7% by the end of 2024, Consumer Price Index (CPI) inflation is expected to stay above the 3% threshold for the second quarter of the year. The Federal Reserve has been successful in achieving a soft landing by cutting rates, and is expected to continue with the cuts till it reaches the neutral rate of 2.5% to 3% by 2027.
Kavan Choksi / カヴァン・チョクシ mentions that given the demographics and labour force participation, current levels of job formation are not sustainable and are likely to result in job growth slows. While the unemployment rate may fall in the short term, it is likely to rise to just under 4% in 2025 before gradually declining. Significant investments prompted by the Inflation Reduction Act are likely to boost the manufacturing industry. Moreover, investments in intellectual property, like the use of AI and other novel technologies, are expected to continue to drive growth in the business sector.
Broadly speaking, the United States economy is expected to achieve real GDP growth of 2.4% in 204, and this growth is likely to slow to 1.1% in 2025. Between 2026 and 2028, economic growth is anticipated to pick back up, with annual gains in real GDP forecasted to range between 1.6% and 1.9% per year.
Risks associated with geopolitical conflicts, persistent inflation, and financial system stress may have a significant impact on the United States economy in 2024. Major conflicts in the Middle East and Ukraine have been simmering for some time. These conflicts may flare up to a higher level, which can result in of higher prices of imported goods and oil. In this scenario, the price of oil may spike to around US$100 for three quarters prior to declining gradually.