Image: Board of Governors of the Federal Reserve System, Official Federal Reserve Photo
Washington: Economists are confident that the US economy will turn around in 2024 as the Federal Reserve appears cheerful as it has won the war on inflation which was largely around 2.7 per cent against the targeted 2.0 per cent.
The month of December 2023 also saw a slight spurt to 3.7 per cent.
Experts said that few economists see a recession looming this year as inflation is cooling and interest rates have been stable, raising hopes that there could be an interest rate cut soon.
After a week in which inflation data seemed to indicate that the Federal Reserve is well on its way to winning the war against rising prices, economists are becoming increasingly more optimistic, media reports said.
The reports said that the producer prices — the costs businesses incur for the supplies and other things they need to make products and deliver services — fell in December and registered a 1 per cent gain for all of 2023, Wells Fargo announced it had changed its mind on recession odds for this year.
“We now look for the U.S. economy to continue expanding over our entire forecast period, which runs through the end of 2025,” experts said.
Other bankers seemed equally positive, while a section cautioned that GDP growth could be weaker than what the country saw in 2023. The year-over-year growth, coming in around 1 per cent or so, is less than half the 2.4 per cent trend seen in the pre-pandemic era.
Wells Fargo said that it pegs the odds of a recession at 40 per cent in 2024.
“Economists have been consistently revising up their 2024 U.S. GDP forecasts over the past four months,” BCA Research said on Friday.
It said that the consensus now anticipates U.S. growth to clock in at 1.3 per cent this year.
Reports said that the current forecasts from the Federal Reserve Bank of Atlanta’s GDPNow model have fourth-quarter GDP growth pegged at 2.2 per cent, a bump up from the 2 per cent just a couple of weeks ago.
The Blue-Chip Economic survey released last week echoed the same sentiments on the economy.
“Forecasters have become more optimistic about the U.S. economy with 74 per cent of respondents thinking that it is headed for a soft landing, that is a return of inflation to around the Fed’s 2 per cent target without the economy experiencing a recession,” the survey of leading economists said.
The survey said that the probability of a recession has fallen to 42 per cent from 65 per cent at the start of 2023.
“We look for another modest sequential gain in retail sales – our call 0.4 per cent – as motor vehicle sales and real-time credit card usage data strengthened last month,” said Sam Bullard, managing director and senior economist at Wells Fargo’s Corporate and Investment Banking group.
He said that consumer confidence improved considerably in December 2023 on better inflation and labour market expectations.
“Looking ahead, we continue to project a slowing consumer spending environment amid a moderating labour market,” he said.
Reports said that recent survey on business outlooks from JPMorgan Chase found that 40 per cent of midsize and 51 per cent of small business leaders expect a recession in 2024 – down from 65 per cent and 61 per cent a year ago. More than two-thirds, 69 per cent, of small business and 67 per cent of midsize business leaders expressed optimism about their company’s performance, the report said.
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