(TND) — Our economy is trying to avoid a long-predicted recession in 2024 as price increases ease, interest rates fall and the job market remains strong, two experts said Tuesday.
“I think in many ways the economy will continue to inspire more optimism than pessimism as we look at the numbers,” said Appalachian State University finance professor Brandy Hadley.
Gross domestic product – a broad measure of the U.S. economy – grew a strong 4.9% in the third quarter of 2023 compared to the previous year.
Hadley and his colleague Brian Blank, a finance professor at Mississippi State University, said they expect “moderate growth” of between 1.5% and 2.5% this year.
“I would say if last year was a great year, this year is going to be a good year,” Hadley said.
GDP numbers for the fourth quarter and year-end 2023 are due to be released in about three weeks.
“The economy is growing pretty quickly right now, and there seems to be a lot of reasons that this will continue for at least several months, maybe even years,” Blank said.
Consumer confidence appears to be improving as inflation eases and rumors of a “looming recession” have faded, he said.
Consumer confidence is critical because consumer spending accounts for about two-thirds of our economy, Blank said.
People fear that weak consumer sentiment could weaken the economy.
“But if you ignore what people are saying up to that point and focus on what they're doing, then I don't think you'd be too worried,” Blank said.
The latest monthly retail sales report showed an annual increase of about 4%.
And two of the most widely cited consumer sentiment surveys, one from the Conference Board and one from the University of Michigan, showed improvements through the end of 2023.
Annual inflation has cooled to around 3% from its recent peak of around 9% in June 2022.
A year ago, the consumer price index showed an annual inflation rate of 6.4%.
And the job market remains strong. The unemployment rate is 3.7% and has not been above 4% for two years.
Greg McBride, chief financial analyst at Bankrate, released his 2024 interest rate forecast on Tuesday.
The federal funds rate is in a range of 5.2% to 5.5%. This sets the tone for consumer borrowing costs, including mortgages and auto loans.
However, the Federal Reserve is expected to cut interest rates this year as inflation cools.
According to Bankrate, McBride expects only two rate cuts, which are much more conservative than the six quarter percent cuts expected by the market.
“We are in a high-yield environment, and we will be in a high-yield environment in a year,” McBride said in a press release. “Possibly. Fed rate cuts will be modest compared to the significant rate hike since early 2022.”
Blank also expects only two or three rate cuts. He assumes that the key interest rate could be around 4.5% by the end of 2024.
Blank also said that “some moderation in inflation is in sight.”
He and Hadley expect the annual inflation rate to move ever closer to the Fed's 2 percent target.
“It seems like there's an increasing level of normalization in this type of economy post-pandemic,” Blank said.
But they said there are still reasons Americans will be nervous about the economy this year.
Housing affordability could improve in the coming year, albeit from its lowest level in decades, they said.
And there are uncertainties surrounding geopolitical tensions and this year's elections.
The election results are changing consumer sentiment, Blank said.
“I think there's a pretty good chance that half of the country will have a really negative view of the economic environment after the election, regardless of who wins,” he said. “And that is certainly a risk. But overall I think the economy is stronger than people expected and I think sentiment will continue to show that.”
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