The US economy in 2024 began on a softer note than expected due to high levels of inflation and interest rates. While a recession is not forecasted for the year, consumer spending growth is predicted to decrease further, leading to an overall GDP growth slowdown to under 1% from the second quarter to the third quarter of 2024. However, there is anticipation that inflation will gradually stabilize at the Federal Reserve’s 2 percent target in 2025, with quarterly annualized GDP growth increasing towards its potential of around 2%. Interest rates are expected to decline towards the end of 2024 but may remain higher than pre-pandemic levels.
Despite strong consumer spending throughout 2023, this trend has begun to weaken. Real retail sales growth is on the decline, and consumer confidence has been decreasing for several months. While real disposable personal income growth has been slowing down, pandemic savings are depleting, and household debt is increasing rapidly. Consumers are now spending more of their income to pay off debts, leading to a rise in auto loan and credit card delinquencies. It is predicted that consumer spending growth will continue to slow in the second and third quarters of 2024 as households struggle to find a balance between income, debt, savings, and spending. Labor market conditions are also expected to play a key role in this balancing act.
Inflation has been one of the main drivers of economic instability in recent years, with prices rising at an unprecedented pace. This has put pressure on households and businesses alike, as they struggle to keep up with rising costs while maintaining profitability.
Interest rates have also played a significant role in shaping economic conditions. Although they are expected to decline towards the end of 2024, they may remain higher than pre-pandemic levels. This could make borrowing more expensive for consumers and businesses alike, which could lead to further slowdowns in economic growth.
Despite these challenges, there remains hope that economic conditions will improve over time. Inflation is expected to stabilize at the Federal Reserve’s target rate of 2 percent by 2025. This could help boost consumer confidence and encourage more spending as people feel more comfortable about their financial future.
However, it will take time for these improvements to be felt across all sectors of the economy. Households will need to find ways to manage their finances more carefully if they want to avoid falling deeper into debt or reducing their spending even further.
Overall, while there are some bright spots on the horizon for the US economy in 2024 and beyond
