NABE Survey Predicts Slower Growth and Increased Inflation
The U.S. economy, which has been experiencing strong growth in the third quarter, is expected to face a significant slowdown next year, according to a survey conducted by the National Association of Business Economics (NABE). Leading economists predict that the growth rate will drop to 1% between the fourth quarter of 2023 and the fourth quarter of 2024.
The NABE Outlook Survey Panel, including NABE President Ellen Zentner, chief U.S. economist at Morgan Stanley, highlighted the anticipation of stronger economic growth projections for 2023 compared to previous surveys. However, the panel also expressed concerns about the slowdown, citing a decrease in construction spending and manufacturing as contributing factors. The Federal Reserve Bank of Atlanta’s GDP Now tracker supports these findings, forecasting a decrease in U.S. GDP to 1.2% in the fourth quarter.
Factors Behind Third Quarter Growth
The surge in the third quarter’s growth was largely attributed to increased summer travel, setting a new record for post-pandemic “revenge travel.” Additionally, consumer spending on experiences such as concerts, including Taylor Swift’s highly successful Eras Tour, further boosted the economy. However, economists believe that these patterns did not continue at the same level in the fourth quarter.
Recession Unlikely, but Inflation Remains a Concern
Despite the projected economic slowdown, fewer economists foresee a recession. The NABE survey reveals that “three in four” economists assign a probability of 50% or less to a recession. However, inflation remains a significant concern. The consumer price index reached its peak at 9.1% during the summer of 2022. Although inflation is predicted to continue moderating, panelists doubt that it will reach the Federal Reserve Board’s 2% target before the end of 2024.
Upcoming Economic Data Reports
Two major economic data reports are scheduled to be released before the Federal Reserve’s December 13 meeting, the last of the year. The first report is on November job growth, which is expected to show the addition of 180,000 positions. The unemployment rate is projected to remain at 3.9%. The following report focuses on consumer inflation, with expectations of a decline to 3.1%, while the core inflation rate, excluding food and energy prices, is anticipated to hold steady at 4%.
Federal Reserve Prepared for Further Rate Hikes
Although market participants expect the Federal Reserve to maintain current interest rates, Federal Reserve Chairman Jerome Powell issued a warning that policymakers may continue with rate hikes. Powell stated, “We are prepared to tighten policy further if it becomes appropriate to do so.” Despite this warning, the market seems unaffected, with the Dow Jones Industrial Average and the S&P 500 reaching new highs in 2023.
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