The World Bank has forecasted a slowdown in U.S. economic growth to 1.6% in 2024, down from an estimated 2.5% in the previous year. The report attributes this deceleration to high interest rates affecting demand and a decline in government spending. The World Bank anticipates falling household savings, elevated borrowing costs, and a cooling labor market to dampen consumer spending, which typically contributes to nearly 70% of economic growth.
The report notes that business fixed investment is also expected to decelerate further as firms exercise caution amid economic and political uncertainties. Additionally, the refinancing of corporate debt at higher interest rates contributes to this cautious approach.
Private-sector economists have adjusted their forecasts in recent months, projecting slower growth for the current year. Analysts surveyed by the National Association for Business Economics anticipate a GDP expansion of just 1% from the fourth quarter of the previous year to the fourth quarter of 2024. Three out of four analysts believe the odds of a recession are 50% or less.
While the Federal Reserve Bank of Atlanta predicted Q4 growth of 2.5%, it suggested that growth likely slowed to 2.2% from 4.9% in the third quarter. The World Bank indicates that U.S. economic growth has softened in the fourth quarter, with expectations of intensifying weakness due to the lagged and ongoing effects of tight monetary policy impacting household spending.
Fed officials estimate a slowdown in GDP growth to 1.4% in the current year, down from their estimate of 2.6% for 2023. Federal Reserve Chair Jerome Powell acknowledged the potential risk of holding borrowing costs too high for too long, causing a downturn and widespread layoffs. The Fed is expected to trim the federal funds rate to around 4.6% by the end of the year.
Globally, the World Bank predicts a slowdown in world economic growth for the third consecutive year in 2024, recording the weakest half-decade of GDP gain in 30 years. The forecast anticipates a 2.4% expansion this year, compared to 2.6% in 2023. World Bank Chief Economist Indermit Gill stated that, without a major course correction, the 2020s could be characterized as a decade of wasted opportunity.
