Shift in US growth expectations signals soft landing

Doha, Qatar: The resilience of the US economy has driven a dramatic shift in its growth expectations. During the first half of last year, the outlook...

Doha, Qatar: The resilience of the US economy has driven a dramatic shift in its growth expectations. During the first half of last year, the outlook for 2024 reflected widespread pessimism given significant headwinds. These headwinds included a high rate of inflation that eroded the purchasing power of households, disruptive commodity markets, and the record monetary policy tightening cycle by the Federal Reserve Board. A recession seemed almost inevitable, and the discussions regarding the macroeconomic outlook centered on balancing the prospects of a “hard” or a “soft” economic landing, QNB said in its economic commentary.

The Bloomberg survey consensus is a useful tool that reveals market expectations and the evolving views over major macroeconomic developments. This benchmark survey tracks forecasts from analysts, think tanks, and research houses, presenting a range of projections, as well as the median point of market expectations. In July last year, the consensus for growth of the US economy in 2024 reached a low of 0.6%. Then, it began a steady upward trend, and increasead by a remarkable four-fold to 2.4% this year, on the back of better-than-expected economic indicators, including a surprisingly strong print for GDP for the last quarter of 2023. This suggests that the economy remains in good standing, and would decelerate gradually relative to the 2.5% expansion of 2023.

In this article, we analyse the evolution of three key production sectors, and their leading indicators, that underlie the resilience of the overall economy and its gradual deceleration.

First, the service sector has remained robust following the post-Covid pandemic normalisation. The GDP figures for the first quarter of this year showed that consumption of services grew at a outstanding annualized rate of 4%, significantly above the yearly expansion of 2.3% in 2023.

The most recent prints of the Purchasing Managers Index (PMI) signal that the outlook remains stable.