As consumers continue to maintain spending, economists have raised their expectations for US economic growth until early 2024 and lowered their expectations for a recession to their lowest level in a year.
According to a latest monthly survey conducted by economists, due to forecasters raising their expectations for household spending, economists expect the US economy to grow at an annualized rate of 3.5% in the third quarter, the highest level in nearly two years. Although economic growth is expected to slow down in the next two quarters, economists have still raised their estimates of GDP.
Although borrowing costs and inflation remain high, the strong labor market continues to support household spending. Therefore, economists have also raised their employment forecast for next year, which explains why they now believe that the likelihood of an economic recession next year is half and half.
James Knightley, Chief International Economist at Dutch International Group, said: "The US economy has had an excellent summer. Strong consumer spending has been the main driving force, and households are keen to use savings and credit card loans to maintain their way of life as inflation continues to erode their spending power
Respondents expect that in 2024, the core price index of personal consumption expenditure, excluding food and energy, will increase by an average of 2.6%, consistent with last month's forecast.
Federal Reserve Policy
Although the median forecast indicates that economists believe the Federal Reserve has completed raising interest rates, they also expect the pace of rate cuts to slow down next year. This may be partly because strong economic data may keep interest rates at a higher level for a longer period of time, and the recent surge in long-term treasury bond bond yields has led to a tightening of financial conditions.
Federal Reserve Chairman Powell stated in a speech on Thursday that "sustained changes in financial conditions may have an impact on the path of monetary policy
Considering the uncertainty and risks, as well as the progress we have made, the committee is acting cautiously, "Powell added.
In addition, respondents believe that potential economic obstacles include the resumption of student loan payments, depletion of savings accumulated during the pandemic, high borrowing costs, and strikes by the three major American automakers.
Despite stronger economic data, we still expect a mild recession in 2024. The surge in yields that support borrowing rates will lead to a slowdown in employment and income growth, leading to a decrease in consumer spending, "said Kathy Bostjanic, Chief Economist of Nationwide Life Insurance Co
This latest survey was conducted from October 13th to 18th, including responses from 74 economists.