What Will the US Economy Look Like in 2024? Don't Rely on Predictions
Anticipating the US economy's future in 2024 while highlighting the unpredictability of forecasts
In November, winter is ushered in with the first frost and Thanksgiving commences the holiday season. Investment banks then produce extensive research of their "outlook" for the year, indicating that the annual economic narrative is mostly complete. At this point, what is of utmost importance is the outlook for the upcoming year.
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When a person reads through all the financial forecasts, they might get the feeling of already having seen them before. Researchers will explain the slight nuances which distinguish their growth or inflation forecasts from those of other experts, usually in the range of 0.30 or 0.40 percent. (The author has had personal experience with this sort of thing.)
The levels of growth and inflation for this year's crop of data are not the same as previous years. Goldman Sachs predicts a strong 2.1% increase in the U.S. economy, while UBS economists forecast a lower rate. Certain banks predict inflation to decrease to half of what it was in 2024, while others believe it will remain stable, only dropping to around 3%. Predictions of what the Federal Reserve will do with interest rates range from no change to a reduction of 2.75 percentage points.
The distinctions between these outlooks go far beyond mere conflicts on growth prospects. Goldman Sachs economists anticipate that inflation and growth will remain strong, while UBS economists anticipate a reduction in both. Bank of America, however, is expecting a type of stagnant inflation, combining a slight dip in inflation with a notable decrease in growth (and, thus, no changes in the Federal Reserve's policy rates). Morgan Stanley, on the other hand, is expecting the opposite; they are predicting a world of "immaculate disinflation," in which inflation returns to its target level without growth dipping far below trend.
The fact that the various outcomes predicted by bank economists all appear viable is a demonstration of how much doubt exists currently. People have been astonished in succession by the intensity of inflation, the pace of rate increases necessary to contain it, and the robustness of the economy. It is almost as if being wrong again and again has given economic seers more liberty: if no one knows what will take place, you can express your true opinion.
Economists from Deutsche Bank have postulated that the economy is heading towards a similar state as it was in the 1970s; with central bankers attempting to contain inflation. UBS prognosticate that the current situation resembles the 1990s; a deceleration in growth due to rising rates followed by a surge in productivity spurred by the introduction of new technology. Jan Hatzius at Goldman Sachs believes that comparisons with the past decades are too basic and can lead investors astray.
Economists appear to have a similar opinion; that the most difficult part of the economic hardships is over. Morgan Stanley's outlook document was titled "The Last Mile" and Goldman Sachs declared "The hard part is over." It appears that the contradictions in the American economy should be straightened out by 2024, and perhaps by 2025 there will be a consensus.
