The U.S. economy is forecasted to be growing rapidly, which is causing concern for the Federal Reserve and those hoping for low interest rates.
U.S. economic growth may be accelerating in the second half of 2023, defying earlier recession forecasts and leading to a repricing of long-term inflation and interest rate assumptions.
Despite predictions of a slowdown, the American economy continues to show strong growth, with recent data suggesting annualized growth of nearly 6% in the third quarter; however, concerns about overheating and potential inflation, as well as increasing bond yields, raise doubts about the sustainability of this growth.
Forecasters have decreased their growth expectations for China due to deflation, rising youth unemployment, and a property-market crisis, with GDP predicted to rise by only 5.1% in 2023 and 4.5% in 2024.
Gross domestic product (GDP) grew at a rate of 2.1% in the second quarter of 2023, driven by consumer spending, while the Federal Reserve is considering raising interest rates again despite a drop in GDP growth; Americans are increasingly turning to credit cards in a high-interest rate environment, leading to rising credit card debt.
Economists at Nomura and Morgan Stanley raise their growth forecast for India's fiscal 2024 after the economy grew at its fastest pace in a year in the April-June quarter, while BofA Global Research cuts their estimates as quarterly growth falls below their forecast.
Forecasts for China's economic growth in 2023 and 2024 have been cut, potentially hindering the country's goal of becoming a "medium-developed country" by 2035 and surpassing the US as the world's No.1 economy.
The U.S. economy is expected to expand at a 2.2% annual rate in the current quarter, according to a real-time estimate from the New York Federal Reserve, which is lower than the Atlanta Fed's estimate of 5.6% growth; the strength of the economy will impact the Federal Reserve's decision on interest rates and inflation.
The Wall Street Journal reports a notable shift in the stance of Federal Reserve officials regarding interest rates, with some officials now seeing risks as more balanced due to easing inflation and a less overheated labor market, which could impact the timing of future rate hikes. In other news, consumer credit growth slows in July, China and Japan reduce holdings of U.S. Treasury securities to record lows, and Russia's annual inflation rate reached 5.2% in August 2023.
Russia's economy ministry has raised its 2023 inflation forecast from 5.3% to 7.5% due to the impact of the war in Ukraine, and President Putin has acknowledged that high inflation is causing difficulties for businesses.
The forecast for next year's Social Security increase has risen to 3.2% from 3% due to a rise in inflation, but the increase is still significantly lower than the 8.7% COLA in 2023, causing concerns for seniors who have struggled to keep pace with inflation and have seen their share of poverty increase.
Stock indices closed higher today, with the Nasdaq 100, S&P 500, and Dow Jones Industrial Average all posting gains, while the healthcare sector lagged behind; the U.S. 10-Year Treasury yield increased, and the Atlanta Federal Reserve lowered its GDP growth estimate for the third quarter. Additionally, Fitch Ratings revised its global growth forecast for 2023 due to concerns about China's real estate sector, and economic data showed an increase in wholesale inflation and retail sales.
J.P.Morgan and ANZ have raised their 2023 economic growth forecast for China to 5% and 5.1% respectively, citing a notable recovery in retail sales and a rise in service activity.
The Central Bank of Russia has raised its key lending rate to 13% in an effort to combat inflation and stabilize the struggling ruble, which has weakened significantly against the dollar due to decreased exports and increased imports. The country also faces challenges with low unemployment and a brain drain of talent to other former Soviet states. However, the Russian government remains optimistic about economic growth forecasts for 2023.
Leading market experts are raising concerns about the growing US debt, warning that it will lead to higher interest rates and potential economic repercussions as federal deficits increase and US debt supply continues to grow.
The Congressional Budget Office (CBO) is revising its projections for this year's US budget deficit, expecting it to be significantly higher than previous estimates, reaching $1.7 trillion in 2023, a 13% increase from four months ago.
The Organisation for Economic Cooperation and Development (OECD) has lowered its forecast for global economic growth in 2024 to 2.7%, while predicting inflation to remain above central bank targets despite interest rate hikes; fears of a slowdown in China and reduced growth in the US contribute to the pessimistic outlook.
The U.S. Federal Reserve kept interest rates steady but left room for potential rate hikes, as they see progress in fighting inflation and aim to bring it down to the target level of 2 percent; however, officials projected a higher growth rate of 2.1 percent for this year and suggested that core inflation will hit 3.7 percent this year before falling in 2024 and reaching the target range by 2026.
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