Ever since the pandemic started to loosen its grip on the economy in 2022, there have been concerns about a potential recession. Throughout 2023, these fears persisted as the economy awaited a downturn. Now, with less than two months left in the current calendar year, attention has naturally shifted to 2024.
However, a new perspective has emerged, questioning whether a landing is even necessary. This viewpoint is supported by the consensus forecast of 34 economists surveyed by the Philadelphia Fed, revealed in the Survey of Professional Forecasters. This survey, which has been conducted quarterly since 1968, provides valuable insights into macroeconomic forecasts in the United States.
According to the survey, the outlook for the U.S. economy appears more positive now compared to three months ago. The forecasters predict that real GDP will experience a moderate increase of 2.4% this year and only slightly slow down to a rate of 1.7% in 2024, based on annual averages.
These projections for annual growth are actually higher by 0.3 and 0.4 percentage points, respectively, compared to the estimates provided in the previous survey.
Furthermore, the economists anticipate only a minimal increase in joblessness. On an annual-average basis, they expect the unemployment rate to gradually rise from 3.7% this year to 4% in 2026.
While inflation is expected to decrease, this decline will occur at a relatively slow pace.
Overall, the surveyed economists offer a cautiously optimistic outlook for the U.S. economy in 2024.
Economic Forecast for the US
The Federal Reserve's preferred measure, the personal consumption expenditure price index, is expected to remain at the target rate of 2% for the next four years, with a slight increase to 2.1% in 2025. However, there is a growing concern among economists that the resilient economy could lead to higher inflation and necessitate another round of interest rate hikes.
While the economy continues to soar, economists caution that the risk of a hard landing has not been eliminated. In fact, there has been an increase in the probability estimates for negative growth in the first three quarters of the upcoming year. The first quarter is deemed the most likely scenario for negative growth, with a 40.9% chance, followed by 40.2% in the second quarter and 36.8% in the third quarter.
It's important to note that there is a significant division among economists regarding the outlook for 2024. UBS economists have released a forecast suggesting a sharp drop in US GDP to a meager 0.3% rate. On the other hand, Goldman Sachs economists are more optimistic, predicting a robust growth rate of 1.8% based on a fourth-quarter over fourth-quarter comparison.
Despite these conflicting views, one thing is clear - the US economy faces both opportunities and challenges in the coming years.