Economists Revise Projections For US Growth This Year

The latest National Association for Business Economics (NABE) survey of forecasting economists about the outlook for 2024 and 2025 suggests that things are looking up since its take last quarter.

They’re projecting real (inflation-adjusted) 2.2% GDP growth, versus the median 1.3% figure expected in December 2023. The median forecast for 2023 Q4 to 2024 Q4 is 1.5%, versus 1.0% in December.

As for 2025, “forecasts for consumer and government spending for 2025 are lower relative to 2024 forecasts,” they write. “Forecasts for nonresidential fixed investment and residential investment in 2025 are higher relative to 2024 projections”

The first and second set of figures seem to differ because the former is annualized growth, which is increasing, at the end of the year versus absolute actual real change between the two endpoints. “Real GDP forecasts for the first half of 2024 have been revised higher—from 0.7% in Q1 and Q2 in the December survey to 2.0% and 1.4%, respectively, in the current survey,” they wrote.

What led to the increased overall projection is differences in forecasts for key sections of the economy between December and now. They include personal consumption expenditures (a particularly important factor for the Federal Reserve), nonresidential fixed investment, residential investment, and government consumption expenditures and gross investment. Trade deficits are expected to narrow, with higher exports expected now versus at the end of 2023. Forecasts for imports are lower.

The panelists overall expect inflation to continue decelerating, reaching the Fed’s 2% goal by the fourth quarter of 2025. Overall Consumer Price Index (CPI) it projected to change to 2.4% by the end 2024.

“The consensus of the panel is that the Federal Reserve will cut the fed funds rate by a total of 76 basis points (bps) by the end of this year, up from the 63 bps projected in the December 2023 survey,” they note. “Respondents call for another 124 bps cuts in 2025, lowering the fed funds rate to 3.375% (mid-point of the target range).” And 79% of respondents expect the Fed to start cutting rates by June (28% said the April/May meeting, 51% said June).

However, there are some wildly different views about rate cuts. Recently, some investors and experts either started to think the Fed might hold off on rate cuts or that it should. The central bank is working on a roughly 12-month backwards look at whether there is continuing “good news,” as Chair Jerome Powell put it during the press conference after the January 31, 2024, meeting. Trends and their interpretation likely will determine everything.

A big change is the NABE view of job growth and unemployment, with projections varying widely. “The median of the five lowest estimates hforecasts 3.6% unemployment by Q4 2024, and the median of the five highest forecasts calls for unemployment to rise to 5.0% by Q4 2024,” they write. “This divergence continues into 2025, as the median of the five lowest estimates forecasts 3.4% by Q4 2025, and the median of the five highest forecasts projects unemployment to be 4.5% by Q4 2025.”

And projections of non-farm payroll monthly employment growth are now 129,000 on average in 2024, up from the 55,000 estimated in December 2023. “After posting a monthly average of 227,000 in Q4 2023, the panel’s median forecast calls for a step down in job growth every quarter through Q3 2024, reaching a monthly average gain of 100,000 in Q3 and Q4,” They write. “Panelists expect job gains at a monthly rate of 128,000 in 2025.”