What recession? Professional forecasters raise expectations for US economy in 2024

What recession? Professional forecasters raise expectations for US economy in 2024
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NEW YORK — This year is shaping up to be a much better year for the U.S. economy than business economists predicted just a few months ago, according to a survey released Monday.

According to the National Association for Business Economics, the economy appears likely to grow 2.2% this year, after adjusting for inflation. That’s more than the 1.3% that economists from universities, businesses and investment firms predicted in the association’s previous survey, conducted in November.

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It’s the latest signal of strength for an economy weighed down by predictions of a recession. High interest rates, intended to control inflation, were supposed to drag down the economy, the thinking went. High interest rates put a brake on the economy, for example by making mortgages and credit card bills more expensive, in hopes of starving inflation of fuel.

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But even with interest rates at very high levels, the labor market and U.S. household spending have remained remarkably resilient. This in turn has raised expectations for the future. Ellen Zentner, chief U.S. economist at Morgan Stanley and chair of NABE, said a wide range of factors are behind the 2024 upgrade, including both government and household spending.

Economists have also more than doubled their estimates for the number of jobs gained across the economy this year, although this is still likely to be lower than the previous year.

Another boost is the fact that inflation has declined since the peak two summers ago.

Although prices are higher than customers would like, they are not rising as quickly as before. Inflation has slowed so much that most forecasters surveyed expect rate cuts to begin in mid-June.

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The Federal Reserve, which is responsible for setting short-term interest rates, has said it will likely cut them several times this year. That would ease pressure on the economy, while raising prices for stocks and other investments.

Of course, interest rate changes take a notoriously long time to filter through the economy and take full effect. That means previous rate hikes, which started two years ago, could still ultimately push the economy into recession.

In its survey, NABE said 41% of respondents cited high interest rates as the biggest risk to the economy. That was more than double all other reactions, including fears of a possible credit crisis or an expansion of wars in Ukraine or the Middle East.

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