This year is shaping up to be a much better year for the U.S. economy than business economists predicted a few months ago.
NEW YORK — This year is shaping up to be a much better year for the U.S. economy than business economists expected just months ago, according to a survey released Monday.
According to the National Association for Business Economics, economic growth this year is expected to be 2.2% after adjusting for inflation. This is higher than the 1.3% expected by economists from universities, businesses and investment firms in the association's preliminary survey conducted in November.
It's the latest signal of the strength of an economy amid recession predictions. The idea was that high interest rates aimed at curbing inflation would depress the economy. High interest rates are putting the brakes on the economy, with rising mortgage and credit card bills in anticipation of fuel starvation inflation.
But despite very high interest rates, the job market and U.S. household spending have remained surprisingly resilient. This has raised expectations for the future. Ellen Zentner, chief U.S. economist at Morgan Stanley and chair of NABE, said there are a wide range of factors behind the 2024 rating upgrade, including government and household spending.
Economists also more than doubled their expectations for the number of jobs gained across the economy this year, although it is still likely to be lower than last time.
Adding to the tailwind is the fact that inflation has cooled since its summer peak two years ago.
Prices are higher than customers want, but they aren't rising as quickly as they used to. Inflation has slowed enough that most forecasters surveyed expect interest rates to start cutting by mid-June.
The Federal Reserve, which sets short-term interest rates, has said it will likely cut rates multiple times this year. That would ease pressure on the economy, while lowering the prices of stocks and other investments.
Of course, interest rate changes take a notoriously long time to percolate through the economy and take full effect. This means that past rate hikes that started two years ago could still ultimately push the economy into recession.
NABE said in its survey that 41% of respondents cited high interest rates as the most significant risk to the economy. This was more than double other reactions, including concerns about a credit crunch and the possibility of more war in Ukraine and the Middle East.