Goldman Sachs – US Economics, 2024

Goldman Sachs predicts that the US economy will continue to perform well in 2024, with strong GDP growth and a low risk of recession. They believe that the inflation problem has been largely solved and that conditions are favorable for inflation to return to its target. Core inflation is expected to decrease further, driven by rebalancing in the auto, housing rental, and labor markets, although there may be a slight increase in healthcare costs. Wage growth is projected to stabilize at a sustainable pace of 3.5%. Overall, core PCE inflation is forecasted to reach around 2.4% by the end of 2024. In terms of economic growth, Goldman Sachs predicts a 1.8% GDP growth in 2024 on a quarter-to-quarter basis, surpassing market expectations. They expect consumption growth to be just under 2%, with real disposable income growth of nearly 3%, partly offset by an increase in the saving rate. Business investment growth is expected to slow down, particularly in manufacturing facilities, while residential investment is expected to remain flat due to the housing shortage. Goldman Sachs also provides insight into the future actions of the Federal Open Market Committee (FOMC). They anticipate the FOMC delivering its first rate cut in the fourth quarter of 2024, once core PCE inflation falls below 2.5%. They then expect gradual rate cuts of 25 basis points each quarter until the second quarter of 2026, ultimately reaching a higher equilibrium rate than in the previous cycle. The report also highlights two key risks that could impact the economy: geopolitical conflicts and the risk of a policy mistake. However, the authors do not foresee any major macroeconomic shocks in their 2024 forecast.