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Monthly update of The Conference Board's forecast for the US economy
Recent financial market gyrations notwithstanding, the US is likely not on the cusp of recession. Nonetheless, the economy is expected to lose momentum in H2 2024 as high prices and elevated interest rates sap domestic demand. Real GDP growth rose by an unexpected 2.8 percent quarterly annualized in Q2 2024 (from 1.4 percent in Q1 2024), led by stronger domestic demand and a surge in inventories. But there were some signs of weakness, especially as consumers dialed back on services spending, which has been a key contributor to real GDP growth over the last two years. Consumers and businesses are likely to continue cutting spending and investments ahead, suggesting economic growth decelerated to 0.6 percent annualized in Q3 2024.GDP Growth to Slow, Not Plunge, in 2024
Faster Activity Likely in 2025
GDP growth probably will be lackluster in Q4 2024, expanding at a tepid pace of about 1 percent annualized. The slightly faster pace relative to Q3 reflects some expectation that falling mortgage rates might stoke modest increases in home sales, and a cheaper US dollar supports slightly faster exports growth. However, growth should rise slightly above 2 percent by the end of 2025, reflecting achievement of the Fed’s 2-percent inflation target, and lower interest rates.
US Consumers Losing Steam
US consumer spending was robust in 2023 but was mixed in the first half of 2024 as pandemic savings ran dry, and high prices and interest rates drained wallets. Real consumer spending on durable goods collapsed in Q1 but rebounded in Q2, probably as costs for big ticket items like cars and furniture started falling in earnest. However, goods spending growth netted out to 0.2 p
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