The U.S. economy saw stellar economic growth in 2023, leaving other developed economies in its wake. Declining inflation, rapid employment growth and the boost to business investment from the government’s Inflation Reduction Act and CHIPS Act all supported the economy. But how is the U.S. economy today, and what is the U.S. economic outlook for 2024?
Q4 data rounds out robust 2023:
U.S. GDP growth clocked 3.3% in seasonally adjusted annualized rate terms in Q4, well above market expectations. The Q4 reading was likely by far the strongest in the G7 and meant that the economy expanded 2.5% in annual terms over 2023 as a whole, above the prior decade’s average of 2.3%. Back at the start of 2023, our Consensus had been for just 0.5% growth, with panelists’ forecasts being persistently upgraded throughout the year.
Significant forecast divergence over the U.S. economic outlook in 2024:
Our Consensus for 2024 GDP growth is currently 1.5%, though this figure will be revised higher in the coming weeks in light of the recent large upward surprise to Q4 2023 data. However, the spread between our panelists’ forecasts is large: Our most pessimistic panelist sees just a 0.8% expansion, while our most optimistic—Goldman Sachs—forecasts 2.9% growth, which would be almost triple the G7 average. This discrepancy likely arises as a result of uncertainty over the persistence of inflation and the timing and scale of the Federal Reserve’s interest rate cuts; there remains some doubt about how the U.S. economy is today.
U.S. long-term economic outlook:
Beyond 2024, U.S. GDP growth is projected to track close to 2.0% out to 2028, the end of the forecast horizon in our PDF reports (forecasts out to 2033 are available via our online FocusAnalytics platform). As a result, the U.S.’ economic clout relative to other major advanced economies will continue to increase. Despite volatile politics and entrenched social division, the U.S. economy will continue to be boosted by key structural advantages—the use of the world’s reserve currency, deep capital markets, a flexible labor market, still-healthy demographics, and the planet’s most dynamic private companies and research institutes.
Insight from our analysts:
On their forecasts, Goldman Sachs analysts said:
“We are above consensus on most components of GDP, especially consumer spending, capex and housing. Our 2.4% forecast for 2024 Q4/Q4 growth (or 2.9% on a full-year basis) reflects a stronger 2.6% pace in 2024H1 driven by consumer spending momentum, the near-term boost to housing from the recent decline in mortgage rates and higher state and local government spending, and then a somewhat softer 2.2% pace in 2024H2 as capex growth related to the IRA and CHIPS Act moderates.”
In contrast, EIU analysts are somewhat more downbeat:
“We will revise up our real GDP growth forecast for 2024 to 1.8%, assuming that real private consumption growth slows, but remains positive. However, if the disinflation trend is interrupted, this would prompt the Fed to maintain its tight stance for longer, weighing on growth.”