Recent economic data indicates that the US economy is poised for solid growth as it heads toward the end of 2024. The S&P Global flash US composite PMI, which measures the performance in services and manufacturing, recorded a score of 54.4 for September, a slight decrease from August’s 54.6. Despite this small dip, it exceeded economists’ expectations of a further decline to 54.3. Chris Williamson, the chief business economist at S&P Global Market Intelligence, suggests this data reflects a resilient economic environment that has carried through the year into the fourth quarter, projecting an annualized GDP growth rate around 2.5%. This indicates that the economic conditions remain favorable, continuing an upswing that businesses can leverage.
Competitive pricing strategies appear to be driving sales and contributing positively to the current economic climate, propelling inflation in goods and services to its lowest levels since May 2020. Williamson pointed out that these diminished price pressures align with inflation remaining below the Federal Reserve’s target of 2%, indicating a balanced economy that has managed to keep inflationary concerns at bay. This supportive data has coincided with optimistic growth forecasts from various financial institutions, including Goldman Sachs, which anticipates a robust 3.1% annualized growth rate for the third quarter. Additionally, the Atlanta Fed’s GDPNow model offers an even more optimistic projection of 3.4%.
The outlook on economic growth has bolstered confidence, particularly in the face of recession fears that emerged after a surprising spike in the unemployment rate to 4.3% in early August. Recession indicators raised alarms, but subsequent improvements in economic metrics have led to a more favorable appraisal of growth prospects. Matthew Martin, a senior economist at Oxford Economics, observed that models monitoring the probability of recession showed significant recovery in September, thereby enhancing confidence in forecasts of above-consensus GDP growth for 2025. The ongoing economic resilience appears to counteract any lingering concerns about downturns.
Despite the optimistic growth data, markets remain uncertain about the Federal Reserve’s upcoming monetary policy decisions. Traders currently assign a high probability—over 95%—that the Fed will lower interest rates by 25 basis points in November, according to the CME FedWatch Tool. However, the sentiment toward future rate cuts has shifted; markets now anticipate fewer cuts within the next year compared to previous expectations. This adjustment reflects a growing belief that while immediate easing is probable, the overarching macroeconomic environment may not necessitate a series of aggressive cuts in the near future.
Moreover, the changes in economic indicators over the past month have had little immediate impact on market perceptions regarding the Fed’s direction. The anticipation of a rate cut is balanced against evolving market conditions, which suggests a more cautious approach as traders adjust their expectations based on recent economic performance. This reflects a broader trend where market confidence can shift rapidly in response to new data, illustrating the interconnectedness of economic indicators, consumer confidence, and monetary policy.
In conclusion, the US economy appears to be on a stable growth trajectory, underpinned by favorable PMI data, effective pricing strategies, and optimistic growth forecasts from prominent economic institutions. This outlook is crucial for supporting consumer confidence and potentially influencing Fed policy. As the economic landscape evolves, both businesses and consumers will be watching closely to see how the Federal Reserve navigates rate adjustments in response to changing economic conditions and market sentiments. As 2024 approaches, ongoing assessments will be essential for understanding the sustainability of this growth and its implications for broader economic wellbeing.