US gross domestic product is forecast to growth 2.2% this quarter, a lower rate than the 3.2% in the fourth quarter, according to the University of California at Los Angeles Anderson Forecast.
Consumer spending helped bolster fourth-quarter GDP, as did inventory replacement after the holidays. Consumer spending is expected to moderate this quarter.
The strong second half of 2023 is expected to carry into this year, and the risk of government shutdown has faded, the forecast said. And while January 2024 retail sales and housing starts were down, the cause was severe weather in the eastern US and not a pullback by consumer or builders.
“US labor markets remain strong, as they have been throughout the post-pandemic economic recovery,” according to the report. “Total nonfarm payroll jobs increased by 2.5% and are forecasted to increase by 1.5% in 2024. That 2024 is lower is more a function of running out of workers than an absence of jobs.”
It noted the possibility of an impending recession, often predicted but never seen, has declined in the face of expansionary fiscal policy, new national industrial policy and consumer spending.
Inflation is also working its way back down to between 2.5% and 3.0% per year. The report said inflation remains high because of residential rents, automobile repair and new health insurance premiums.
There are some risks to the forecast. It noted a protracted shutdown of government has been averted, but the possibility still exists.
“Geopolitical events might upset the current growth pattern,” according to the report. “The election could result in different national economic policies in 2025. These uncertainties are substantial and bear watching, as they could drive the economy off the current growth path that would return the US economy to trend 2.5% growth.”
However, the upside to the forecast is that new technology could drive higher wages and higher GDP.
“While our view of AI and robotics is that the impact will be felt after 2026 because technology adoption tends to take time, current tight labor markets could accelerate that,” according to the forecast.