A recent report by Swiss Re has projected a 2.2% growth rate for the US economy in 2024, up from earlier forecasts. However, analysts warn that this upward revision masks underlying weaknesses that could challenge sustained economic momentum.
The growth projection is largely due to a statistical phenomenon known as the “carry-over effect,” which mechanically inflates annual growth figures based on strong performance in the prior year’s final quarter. This anomaly added 1.3 percentage points to the projected 2024 GDP growth, compared to just 0.7 percentage points last year.
Despite the upbeat forecast, Swiss Re maintains a cautious outlook, projecting four quarters of below-trend growth in 2024. Quarterly growth is expected to decelerate steadily, falling below the long-term trend of 1.9% before rebounding modestly to 1.4% in Q4.
Analysts point to high interest rates and persistent inflation as key concerns, which are expected to weigh on consumption and corporate investment. Rising corporate insolvencies and declining trade flows are also anticipated to stress key economic sectors, including insurance and manufacturing.
Inflationary pressures remain a concern, with Swiss Re’s 2024 inflation forecast pegged at 3.5%, slightly above the Federal Reserve’s 2% target. The report suggests that policy easing by the Federal Reserve may be gradual this year, as persistent economic momentum contributes to elevated interest rates supporting investment returns.
The report highlights specific challenges for the insurance sector, where rising insolvencies and weaker consumption could stress credit and surety lines. Globally, the carry-over phenomenon is less pronounced in other regions, with the Euro area forecasted to grow by just 0.3% in 2024.
Swiss Re has also upgraded its 2025 US GDP forecast, projecting growth at 1.9%. The report concludes that while the US economic outlook appears solid on paper, analysts caution against over-reliance on headline forecasts, as significant headwinds warrant a more nuanced perspective.
Source: https://uk.investing.com/news/forex-news/us-economic-outlook-less-robust-than-the-headline-forecasts-suggest-3844370