Economic Outlook U.S. Q4 2023: Slowdown Delayed, Not Averted

S&P Global Ratings expects the U.S. economy to slip below trend for a drawn-out period. While we now expect the economy to expand 2.3% this year (up from 1.7% in our June forecast), we see growth slowing to 1.3% in 2024 and 1.4% in 2025, before converging to trend-like growth of 1.8% in 2026. We expect the unemployment rate to rise to 4.8% in 2025, above the longer-run steady state of 4.0%-4.5%. We continue to forecast core inflation finally falling closer to 2.0% by this time next year (see table 1 for forecast highlights and table 2 for extended baseline forecasts). We now expect the Fed to hike the policy rate another 25 basis points (bps) in its November meeting.

...- After stronger-than-expected growth so far, the U.S. economy is poised to slow down for the rest of 2023 and come in below trend for the next two years. The balance of risk to our baseline forecast is tilted to the downside. - Labor-market imbalance has diminished during the summer, and high inflation continues to unwind. Still, the last mile of disinflation is going to take longer, with core inflation taking another 12 months to get comfortably near the Fed's 2% target. - Policy interest rate appears to be, at or close to, a peak. We anticipate one more rate hike in this tightening cycle, but monetary stance will continue to tighten in real terms, peaking in the second quarter of next year. S&P Global Ratings expects the U.S. economy to slip below trend for a drawn-out period. While we now expect the economy to expand 2.3% this year (up from 1.7% in our June forecast), we see growth slowing to 1.3% in 2024 and 1.4% in 2025, before converging to trend-like growth of 1.8% in 2026. We expect...

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