Economists are decidedly more upbeat about the U.S. outlook than they were six months ago, seeing activity nearly on par with 2023 as strong job gains fuel consumer spending and growth without derailing the progress on inflation.
Growth is projected to average 2.2% this year, more than twice as fast as anticipated in September, according to the latest Bloomberg monthly survey of economists. Odds of a recession in the next 12 months dropped to 35%, the lowest since July 2022 and down from 55% in September.
Respondents expected employers would add an average 150,000 jobs per month in 2024 — more than four times what they predicted six months ago, in turn driving a 2% increase in household spending. Consumer activity accounts for about two-thirds of the U.S. economy.
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The survey also showed economists anticipated a 2.4% increase for private investment this year, up from the 1% growth seen in September.
Despite those revamped forecasts, and surprisingly strong inflation data from January and February, economists stuck to their outlook for tamer price rises.
Economists forecast the core personal consumption expenditures index — the Federal Reserve's favored gauge of underlying inflation — will average 2.5% in 2024. That's a tick below what they expected in September and, if realized, would represent meaningful progress from the 2.9% recorded at the end of last year.
Declining inflation will allow Fed policymakers to begin reducing interest rates by June, according to the respondents' median estimate, and twice more before the end of the year.
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The total number of rate cuts is one fewer than economists expected just last month and in line with central bank officials. The median projection from Fed policymakers at their most recent meeting, however, came close to moving down to two cuts this year.
"The Fed doesn't want to cause a recession if it can avoid it, and we believe they will be in a position to start moving monetary policy from a restrictive position to a more neutral stance before the summer," said James Knightley, chief international economist at ING Financial Markets.
Respondents in the Bloomberg survey conducted March 18-21 continued to expect elevated rates will eventually weigh more heavily on GDP. The latest median forecast for growth in 2025 is 1.7%, slightly below the pace forecast in September.
