Anjali Sharma
GG News Bureau
WASHINGTON DC, 4th Jan. According to media reports on Wednesday stated that the US and the global economy may face major challenges in 2024 though they have proved to be surprisingly resilient in the past year.
Due to ongoing wars, still-elevated inflation and continued high interest rates could impact GDP growth rates, report said.
The media stated “Chastened by an economy that outfoxed their predictions in 2023, economists are taking a cautious approach to 2024,”.
Global economists are calling for a consensus on a growth slowdown, perhaps a mild recession and an economy marked by lower interest rates and lower inflation. But a few are sticking their necks out, saying “the economy could be stronger than expected or that interest rate cuts could come sooner and be more frequent”.
Kevin Kliesen, a business economist and research officer at the Federal Reserve Bank of St. Louis said that “Looking at 2024, economic conditions are expected to deteriorate modestly, though real GDP growth and the pace of job gains are expected to remain positive, and inflation is expected to decline to around 2.5 per cent,”
“This outcome, should it occur, would seem to vindicate those who have long believed in the possibility of a soft landing for the economy,” he added.
The 2024 forecasts, the US economy, are based on a shift in the US Federal Reserve’s policy.
The central bank hinted at its December that meeting it could halt interest rate hikes and even consider dropping them from the rapid rise in interest rates that characterized the last 18 months.
The media report noted the surge in inflation that occurred in the beginning of 2022 is projected to become a trickle as 2024 progresses.
Economists don’t believe matters will return to the pre-pandemic era of extremely low inflation and interest rates, media reports said.
Andrew Patterson, senior international economist at Vanguard said that “We believe that interest rates will remain above the rate of inflation,”
“The days of ultra-low interest rates are over, and we have greater conviction in this view than we did just a year ago.”
“Money savers could be rewarded for their prudence and long-term investing could return to favor after several years of momentum stock-picking, said Patterson, added that “an era of sound money, where savers earn positive real returns and borrowers need to carefully weigh capital costs, is with us for the foreseeable future”.
The media report stated that the key difference in 2024 for most Americans will be the moderation in inflation. After seeing consumer prices spike to a 9 per cent annual level of inflation in mid-2022, the level of inflation has fallen to around 3 per cent and is expected to decline further to the mid-2 per cent range or lower.
It said the prices could be ascendant from inflated levels, but the rate will be closer to levels that are more in line with pre-pandemic history. Interest rates, having peaked in 2023, will be on the downward trajectory even if they settle at a higher level than before the Covid-19 era.
RSM US economists said “These two dynamics of robust employment and falling inflation will result in notable gains in real disposable income for American households and will be the difference between the solid expansion that we forecast and a more modest pace of growth closer to 1 per cent,”.
RSM US Middle Market Business Index is based in Washington and offers legwork to keep the government and corporations ahead of issues that affect their bottom line
It noted the housing mortgage rates are likely to settle in the 6 per cent range or lower from the high of 8 per cent registered last year. Housing rent or sale or buys could usher in a positive outlook for the housing market that has shown signs of life recently.
Demographic changes will be at the forefront of demand in 2024 as baby boomers continue to sit on houses with 3 per cent and below mortgage rates and older millennials enter the key time of their careers.
The average age of a new homeowner is now 36, up three years from 2021.
“Boomers are going to be in charge of the market for the next 10 years or so,” said Lisa Sturtevant, chief economist at Bright MLS.
Supply chains battered during the pandemic are mostly back to normal, and evidence of that is the fact that car dealers are offering incentives as their lots are full again.
The labor market is predicted to cool down after proving far stronger than expected in 2023. Monthly job gains are forecast to hit around the 100,000-mark after being more than double that for much of 2023.
The unemployment rate could tick up to 4 per cent or so from its current 3.7 per cent level.
Productivity has picked up recently, touched 4.7 per cent in the third quarter (Oct-Dec 2023) and advancing at a 4 per cent rate in the past six months. Companies have been investing heavily in new manufacturing capacity, as well as in new technologies such as robotics and artificial intelligenc..
AI is the new buzz in the investing market now. Its driving outsized gains in the top technology stocks in 2023, but some caution is warranted, said Takahide Kiuchi, a former Bank of Japan monetary policy official and executive economist at the Nomura Research Institute.
“The impact should not be exaggerated,” Kiuchi said, adding that “the silicon cycle is moving upward right now” although he doubts it will be great enough to offset an overall slowing of the US economy in 2024.
Biden has disappointed progressives within the Democratic Party, he has governed as an interventionist in the economy, pushing domestic manufacturing, clean energy and providing help to lower-income households, the reports said.
The report stated that Donald Trump is campaigning as a friend of the rich, promising tax cuts that would likely empower wealthy earners while also touting more tariffs on imported goods, a policy that is generally harmful to American consumers.
The geopolitical arena is as hot as ever, with conflicts in the Middle East and Europe raging and lower temperature jousting in Asia a constant threat to world peace.
The media reports said recent drone attacks on commercial shipping interests in the Red Sea and the Suez Canal region have raised specters of an energy shock or a broader, regional conflict. A slowing economy in China, the world’s second largest, is also a risk factor for overall global growth.
In summary, the risks are there for an otherwise moderately positive forecast for 2024.
US economy surprised most people in 2023. Whether it can do so again is the question that will remain to be answered, it concluded.
