Possibility of a "soft landing", the Fed continues to keep interest rates high, growth momentum "relies" entirely on consumption

Economists are increasingly optimistic that the US can avoid a recession, with inflation cooling without much damage to the labor market.

Experts predict that the US economy will grow by an average of 2% in 2023 and 0.9% in 2024. (Source: Twitter)

Economists have raised their forecasts for US economic growth next year, but believe the US Federal Reserve will continue to keep interest rates high for longer, according to a survey conducted by Bloomberg from August 11 to 16, 2023.

Economists surveyed forecast that US gross domestic product (GDP) will increase by 1.8% in the third quarter of 2023, nearly four times higher than the 0.5% rate given in July 2023.

Experts also forecast the economy will continue to grow in the fourth quarter, instead of shrinking as previously forecast.

Consumer spending, which accounts for about 66% of US GDP, continues to grow steadily and is seen as the engine of the economy. Economists are increasingly optimistic that the US can avoid a recession, with inflation cooling without causing much damage to the labor market.

While Americans will face loan payments and higher interest rates in the coming months, a strong jobs market is expected to continue to boost spending.

U.S. consumers will face some headwinds in the coming months, but the undeniable resilience in the first half of the year and the strong start to the third quarter have increased the likelihood that the economy can avoid falling into recession, according to Brett Ryan, senior economist at Deutsche Bank AG.

Experts forecast the US economy will grow an average of 2% in 2023 and 0.9% in 2024, both higher than estimates given in July 2020.

Economists also expect the global economy to grow more than initially expected in 2023, echoing more optimistic forecasts from the International Monetary Fund (IMF) and the World Bank (WB).

Meanwhile, the survey also indicated that the Fed will continue to keep interest rates high for a longer period. Although economists do not forecast the Fed will continue to raise interest rates, they also do not expect the US central bank to cut interest rates before the second quarter of 2024, 3 months later than previously forecast.

The recent deflationary trend is expected to continue. Excluding volatile food and energy prices, economists expect the core personal consumption expenditures (PCE) price index to cool more rapidly through the end of the year.

At the same time, lower unemployment forecasts through the end of 2024 and a more optimistic hiring situation will continue to support the US economy's "soft landing".

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