Economists Remain Optimistic About Economy

New York, NY, July 18, 2024-"The Wall Street Journal’s latest quarterly survey of business and academic economists shows forecasters remain firmly optimistic about the economic outlook, despite some hints of weakness in recent data.

“For about two years, economists consistently underestimated the strength of the U.S. economy, forecasting the economy would grow slower than it did.

“That changed recently when growth was lower than expected in the first three months of the year. Still, most economists believe that a slowdown was inevitable after a period of rapid expansion and too-high inflation. The economy, they argue, is normalizing rather than deteriorating.

“The Journal’s latest survey of economists concluded July 9, two days before consumer-price index data showed inflation easing substantially in June. That may partially explain why inflation forecasts nudged a bit higher since the last survey in early April.

“The difference, though, is marginal. Current forecasts-like previous forecasts-show strong confidence that the Fed will succeed in bringing inflation down to its 2% target. The question has been what it would take to get there.

“The recent uptick in the unemployment rate and decline in inflation has rekindled hopes among investors that the Fed could cut short-term interest rates as many as three times this year-starting most likely in September.

“Still, the recent good news on inflation has only come after a series of disappointing readings, including one that came out just after the April survey was conducted. As a result, the latest survey of economists shows a slightly higher path for rates.

“Economists’ optimistic outlook can be seen in the dispersion of rate forecasts. The Fed would likely cut rates more aggressively if it were worried about a recession. However, 22% of survey respondents think that rates will fall below 3.75% by June 2025-down slightly from 25% of respondents in April.”

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