10 Key Economic Trends to Watch in 2024

The year 2024 is shaping up to be a challenging one for the U.S. economy, with various factors pointing towards a deceleration in economic growth. As the effects of monetary policy take a broader toll and post-pandemic tailwinds fade, experts are predicting a soft landing for real GDP growth.

Consumer spending, a major component of GDP, is expected to rise at a more muted pace in 2024, while fiscal spending could shift from a positive contributor to a modest drag. Business investment and housing activity, which saw notable drops in 2023, are expected to show improved performance in the coming year despite the outlook remaining muted due to higher interest rates.

The Federal Reserve is expected to keep the Fed Funds rate on hold at 5.25%-5.5% until the middle of 2024, with gradual rate cuts forecasted starting in June. Quantitative tightening, the Fed’s balance sheet runoff program, is also expected to continue at the same pace through 2024.

The U.S. consumer, while showing signs of potential stress with factors like student loan payments restarting and credit card delinquencies rising, is expected to remain resilient overall. Household balance sheets and debt servicing levels are healthy, and tight labor markets continue to support employment and income levels.

The fiscal deficit, which doubled in fiscal 2023, is expected to narrow in 2024, reflecting some belt-tightening on the spending side. Labor markets are showing signs of normalization, with unemployment expected to drift higher but remain low in historical context.

Inflation trends are cooling but are likely to remain above the Fed’s 2% target through 2024. Housing sector activity has dropped significantly over the past 18 months, but there are expectations for a potential improvement in 2024. Supply chain bottlenecks are mostly in the rearview, but global supply chain restructuring will take time.

Pressures on the commercial real estate sector are expected to intensify, with tightening lending standards and slowing growth. Geopolitical risks, including trade tensions with China and conflicts in various regions, will remain top of mind heading into 2024.

Overall, the economic outlook for 2024 is one of cautious optimism mixed with challenges, as various factors come into play to shape the trajectory of growth in the coming year.