This year is looking much better for the U.S. economy than business economists predicted just a few months ago, according to a survey released Monday.
The economy is expected to grow 2.2% this year, adjusted for inflation, according to the National Association of Business Economics. That’s up from the 1.3% that economists at universities, businesses and investment firms predicted in the association’s previous survey in November.
This is the last signal of strength for an economy that exploded recession forecasts. High interest rates, designed to bring inflation under control, were supposed to drag the economy down. High rates slow down the economy, e.g. mortgage registration And credit card accounts more expensive, in the hope of stopping fuel inflation.
But even with very high rates, the labor market and household spending in the US remained surprisingly stable. This, in turn, raised expectations for the future. Ellen Zentner, chief U.S. economist at Morgan Stanley and president of NABE, said a wide range of factors were behind the 2024 rating upgrade, including both government and household spending.
Economists also more than doubled their estimates of the number of jobs created in the economy this year, although it will likely still be less than the previous year.
Another incentive is the fact that inflation is cooling down since its peak two summers ago.
Although prices are higher than buyers would like, they are not rising as quickly as before. Inflation has slowed so much that most forecasters surveyed expect interest rate cuts to begin by mid-June.
The Federal Reserve, which is responsible for setting short-term rates, said it would probably cut them a few times this year. This would ease pressure on the economy while raising prices shares and other investments.
Of course, rate changes take a very long time to penetrate the economy and take full effect. That means past rate hikes that started two years ago could still end up pushing the economy into recession.
In its survey, NABE reported that 41% of respondents cited high rates as the most significant risk to the economy. This was more than double any other reaction, including concerns about a possible credit crunch or wider wars. in Ukraine or Middle East.