Although real GDP growth slowed in the first quarter (Q1) this year, it is looking increasingly as though policymakers have managed to avoid a recession, all while bringing down inflation closer to the 2-per cent target.

Deloitte’s baseline scenario is still positive in the near term. Consumer spending is expected to remain strong for the first half of 2024 due to sustained improvements in the labour market and stable levels of spending by the business and government sectors, Deloitte said in an insights piece on its website.

These factors are projected to support real gross domestic product (GDP) growth this year in the United States, it noted.

In the baseline scenario, GDP growth is expected to continue to moderate across the second half of this year and the start of the next, and consumer spending is forecast to rise by 2.3 per cent this year, up from the 2.2-per cent increase in 2023.

Business investment is expected to increase by 3 per cent in 2024, down from 4.5 per cent last year. Government spending is forecast to rise by 2.5 per cent, imports will increase by 3.1 per cent on an average in 2024, while exports are predicted to rise at a slower pace of 2.4 per cent in the baseline scenario.

Consumer price index (CPI) inflation stays above the 3 per cent threshold for Q2 2024 before falling to 2.7 per cent by the end of 2024 under this scenario.

Overall, Deloitte expects the US economy to post real GDP growth of 2.4 per cent this year, slowing to 1.1 per cent in 2025 in this scnario. Between 2026 and 2028, economic growth is expected to pick back up, with annual gains in real GDP forecasted to range between 1.6 per cent and 1.9 per cent per year.

The second scenario considers persistent inflation and geopolitical conflicts. In this scenario, tariffs may increase the cost of imported intermediate inputs by 1 per cent and imported final goods by a further 1 per cent. CPI inflation will persist above 3 per cent until Q2 2025.

In this second scenario, GDP growth is lower than in the baseline scenario, particularly over the next two years. Growth in 2024 is pegged at 2.2 per cent; by the following year, the tariffs are fully implemented, and growth in 2025 is likely to be just 0.6 per cent. Growth averages 1.7 per cent per year from 2026 to 2028.

In Deloitte’s baseline forecast, the Red Sea disruptions won’t get worse, but they won’t get better either. Likewise, the Panama Canal restrictions will remain at current levels and will not tighten further. The combined effects of these restrictions will put upward pressure on prices and prevent inflation from falling as quickly as it otherwise could this year.

However, with the US economy expected to outperform many other global economies in the short term, Deloitte forecasts import growth to rise, but export growth to slow. 

Fibre2Fashion News Desk (DS)