I’ve added some thoughts and made some predictions for each question.
1) Economic growth: Economic growth was probably close to 2.6% in 2023. The FOMC is expecting growth of 1.2% to 1.7% Q4-over-Q4 in 2024. How much will the economy grow in 2024? Will there be a recession in 2024?
Here is a graph of 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity from FRED since 1976.
The arrows point to some of the earlier peaks and troughs for these three measures – and the most recent likely bottom.
New home sales and single-family starts turned down in 2022 in response to higher mortgage rates. However, all three measures appear to have bottomed without a recession.
The third graph shows the YoY change in New Home Sales from the Census Bureau. Currently new home sales (based on 3-month average) are up 5% year-over-year.
Here is a table of the annual change in real GDP since 2005. Prior to the pandemic, economic activity was mostly in the 2% range since 2010. Given current demographics, that is about what we’d expect: See: 2% is the new 4%..
Note: This table includes both annual change and q4 over the previous q4 (two slightly different measures). For 2023, I used a 2.6% growth rate Q4 over Q4. (this gives 2.4% real annual growth).
Real GDP Growth | ||
---|---|---|
Year | Annual GDP |
Q4 / Q4 |
2005 | 3.5% | 3.0% |
2006 | 2.8% | 2.6% |
2007 | 2.0% | 2.1% |
2008 | 0.1% | -2.5% |
2009 | -2.6% | 0.1% |
2010 | 2.7% | 2.8% |
2011 | 1.6% | 1.5% |
2012 | 2.3% | 1.6% |
2013 | 2.1% | 3.0% |
2014 | 2.5% | 2.7% |
2015 | 2.9% | 2.1% |
2016 | 1.8% | 2.2% |
2017 | 2.5% | 3.0% |
2018 | 3.0% | 2.1% |
2019 | 2.5% | 3.2% |
2020 | -2.2% | -1.1% |
2021 | 5.8% | 5.4% |
2022 | 1.9% | 0.7% |
20231 | 2.4% | 2.6% |
1 2023 estimate based on 2.6% Q4 SAAR annualized real growth rate. |
My sense is growth will be sluggish in 2024, and the economy will avoid recession. Monetary policy is restrictive, but the Fed is expected to cut rates this year. Vehicle sales will probably pick up in 2024, and so will new home sales.
Here are the Ten Economic Questions for 2024 and a few predictions:
• Question #2 for 2024: How much will job growth slow in 2024? Or will the economy lose jobs?
• Question #3 for 2024: What will the unemployment rate be in December 2024?
• Question #4 for 2024: What will the participation rate be in December 2024?
• Question #5 for 2024: What will the YoY core inflation rate be in December 2024?
• Question #6 for 2024: What will the Fed Funds rate be in December 2024?
• Question #7 for 2024: How much will wages increase in 2024?
• Question #8 for 2024: How much will Residential investment change in 2024? How about housing starts and new home sales in 2024?
• Question #9 for 2024: What will happen with house prices in 2024?
• Question #10 for 2024: Will inventory increase further in 2024?