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Inflation will likely cool further in coming months, despite the uneven disinflationary process so far, S&P Global’s US chief economist Satyam Panday, wrote in a research piece.
“We have not changed our 2024 outlook for monetary policy. We believe the Federal Reserve will cut its policy rate by 25 basis points at its June meeting, with cuts totaling 75 basis points by year-end,” he wrote.
The rating agency now expects US real GDP growth of 1.6 per cent between the fourth quarter (Q4) of 2023 and Q4 2024, and US real GDP growth of 2.4 per cent this year, slightly weaker than the 2.5 per cent growth the US witnessed in 2023.
Beyond favorable year-end base effects, economic activity in the first quarter this year has been running warmer than the rating agency anticipated. Consumer spending is benefitting from a strong labour market.
Survey trends suggest manufacturing may have found a floor for now and will start adding to growth, albeit modestly, this year, Panday wrote.
S&P Global has lifted its estimates for job growth this year in response to higher economic growth. The unemployment rate held steady at 3.7 per cent in December and January, and it has now been below 4 per cent for two years.
Labour supply and demand are, however, coming into better balance. S&P Global thinks the labour participation rate will continue to edge up this year while the high-pressure economy brings more people off the sidelines and into the labour force.
But beyond this year, the labour participation rate is anticipated to move lower as the ongoing retirement trend among baby boomers dominates.
S&P Global continues to forecast that core inflation (excluding energy and food prices) will finally fall closer to levels consistent with the Federal Reserve’s 2-per cent target on a sustained basis by the middle of this year.
Fibre2Fashion News Desk (DS)