US Economic Outlook for 2024: What Businesses Need to Know

Curious to know the US economic outlook for 2024? One valuable resource to rely on is The Freedonia Group’s quarterly Short-Run US Economic Forecasts slide deck, developed by an experienced in-house economics team and available on our website as a free download.

To discuss the economic data, I spoke with Freedonia’s Chief Economist Thomas Bowne, who has been with Freedonia since 1997 and manages the company's economics unit. He has a bachelor's degree in economics from Princeton University and a master's degree in economics from Stanford University. Read our Q&A below to learn more about the US economic outlook for 2024 and key overarching trends to watch.

How does the current economic environment compare to previous years?

As estimated by inflation-adjusted gross domestic product (GDP), economic growth in 2024 is expected to be slower than that in 2023, but comparable to the 2018-2023 average growth rate.

Is there anything surprising in this new data set?

Growth in personal consumption spending continues to surprise to the upside, as it has since the first quarter of 2023. PCE rose 2.5% at an annualized rate during the first quarter of 2024, a full percentage point higher than our forecast in early February.

At the start of 2023, many forecasts, including ours, had projected the US economy to fall into recession at some point during the first half of the year. Growth in household spending had been lackluster for most of 2022, but it accelerated in the first quarter of 2023, powering solid gains in overall economic activity. Since the second half of 2023, near-term forecasts for household spending have been upbeat, but actual performance has exceeded those expectations. That was again the case in the opening quarter of 2024.

Residential fixed investment spending was surprisingly strong in the opening quarter of 2024, notching annualized gains of 14%. Single-family starts helped to fuel the gains, as did completions of in-process multifamily housing units. Multifamily housing starts, however, plummeted during the quarter, and the forecast is for only marginal gains from that level for the rest of the year. Therefore, any hope of sustained vigor in residential spending will depend on new single-family housing and improvements.

What about US inflation rates?

Inflation rates have declined substantially from their June 2022 peak, but year-over-year price increases remain over 3% and well above the Federal Reserve Bank’s 2.0% target. Looking at the decline in inflation over the past two years, there appears to be a danger that progress in reducing inflation is stalling. The difference between 3% annual inflation and 2% annual inflation may seem slight, especially for people younger than 45, who did not experience the double-digit annual price growth of the early 1980s. With 3% annual inflation, the purchasing power of a dollar is cut in half in 24 years; with 2% annual inflation, it takes an additional year to do so. It’s quite likely that this faster erosion of purchasing power is a significant reason for US households’ pessimistic view of the current economic situation.

How do geopolitical events factor into Freedonia’s US economic forecast?

I think most forecasts, including ours, start with an implicit assumption that the geopolitical situation at the time of the forecast will not change much over the short-term.

In the medium and longer term, the efforts to re-engineer supply chains and rely more on domestic manufacturing may result in slower growth, if not declines, in inflation-adjusted volumes of global trade in goods and services. Other effects may include slower growth in productivity and higher costs of production.

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About the Blogger: Sarah Schmidt is a Managing Editor at The Freedonia Group, a premier international business research company that provides unbiased, reliable industry market research and analysis to help clients make important business decisions.