The economic outlook for 2023, 2024 for the United States is largely predicated on the fact that the past year has been characterised by decelerating growth, monetary tightening and the Federal Reserves’ battle to tame inflation. The tough year that’s been 2022 and concerns of a slump into recession and slowed economic growth are there.
However, trends that suggest improving consumer patterns, coupled with a robust manufacturing and trade could provide the trigger that flips momentum.
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What’s notable is that the US boasts one of the world’s biggest economies, even after unchecked deficit spending during the Covid-19 pandemic and through 2021 provided major hiccups to what had been unprecedented growth.
Here we detail the key components of the US economy, with the projections that will likely shape growth for the world’s third most populous nation.
US economy – top statistics, trends and projections
- US economy is forecast to slow in 2023, with growth at 0.5-1% as it enters mild recession
- The United States GDP (nominal) was worth $25.035 trillion in 2022; Real GDP is projected to grow by 0.5% in 2023 and 1.0% in 2024.
- Government spending has accounted for 38.9% of GDP over the past three years.
- US inflation increased 7.1% in November but slowed further from the 9% peak reached in June 2022.
- Inflation is set to fall further, but will remain above the Fed’s 2% target up to end of 2023
- A stronger dollar will have an impact on the US economic outlook in 2023, with implications for the GDP.
- The US federal deficit for fiscal year 2022 was $1.38 trillion
United States economy: Overview of Gross Domestic Product (GDP)
1. The US has the world’s largest nominal GDP, currently over $25 trillion
The United States GDP (nominal) was $25.035 trillion in 2022, up from $22.9 trillion in 2021. The GDP model measures the total economic output of a country every year and considers the components of personal consumption, government spending, business investment, and net exports. For the US, the economy is expected to slow down with GDP growth rates of 0.5-1%.
2. The US has the second-largest purchasing power parity (PPP) in the world, behind China
The United States GDP (PPP) per capita was $25.04 trillion as of December 2022, second behind China whose purchasing power parity by country output was $30.07 trillion. Unlike nominal GDP that assesses a country’s output based on international market exchange rates, PPP focuses on a country’s prices for local goods and inflation. This gives a better picture of the domestic market and therefore a great tool for investors.
3. The GDP value of the United States represents 10.29 percent of the world economy
As the world’s largest economy, the US’ GDP value represents approximately 10.29% of the world economy. The share of global GDP for the US was more than 24% in 2021, which combined with China (the world’s second largest economy) represented 42% of the $94 trillion world GDP.
4. The US economy expanded by 5.9% in 2021, up from 2.8% contraction in 2020
The US economy grew 5.9% in 2021, more than the forecast 5.7%, for the biggest expansion since 1984. Coming off the rough terrain that was pandemic-curtailed growth in 2020, the growth rate was better than the record 2.8% contraction seen as COVID-19 recession impacted the global economy.
5. The GDP per capita in the United States was $75,180 in 2022
The GDP per capita in the United States was approximately $75,180 in 2022. The US ranks as the seventh-highest globally in terms of per capita GDP (nominal), and its per capita GDP (PPP) is the world’s eighth-highest. As of 2021, per capita GDP (nominal) was $61,855. According to the World Bank, the United States’ GDP per Capita was equivalent to 490% of the global average.
6. Gross National Product in the United States reached an all-time high of $20.18 trillion in Q3, 2022
According to the US Bureau of Economic Analysis, the Gross National Product in the US averaged $9.4 trillion from 1950 until 2022. The GNP then rose to an all-time high of $20.18 trillion in the third quarter of 2022.
7. US government spending has amounted to 38.9% of GDP for the past three years
US government spending accounts for a bigger chunk of the total output. Over the past three years, government spending has amounted to roughly 38.9% of GDP, with budget deficits averaging 9%. According to the IMF, the expenditure as a percentage of the GDP for the US government was 42.36% in 2021.
8. US revenue for FY 2022 was $4.9 trillion
The total government revenue for the fiscal year 2022 was $4.90 trillion, with taxes, national parks fees, and customs duties the main source. The federal government uses most of its revenue for employee salaries, infrastructure development and maintenance and provision of other services to citizens and businesses. Where the government spends more than it collects, the result is a national deficit.
9. The US federal deficit for fiscal year 2022 was $1.38 trillion
The US federal government expenditure has exceeded revenue by $336.41 billion so far during the fiscal year (FY) 2023. The national deficit will likely grow as the government spends more than it collects, with FiscalData stats for 2022 showing a deficit of $1.38 trillion. In FY 2022 the government spent $6.27 trillion against a total revenue of $4.90 trillion. While the deficit stood at $1.38 trillion for the year, this showed a decrease of $1.40 trillion from FY 2021.
US economy growth outlook in 2023-2024
10. Real GDP is forecast to grow 0.5% in 2023 and 1% in 2024
Real GDP) growth was 3.2% in the third quarter of 2022, up from a rate of -0.6% in the second quarter. While the increase in Q3, 2022 was down to increased exports and improved consumer spending, the forecast has the GDP growth rate at 1.2% in Q4, 2022; 0.5% in Q1, 2023 and 0.4% and 0.3% in the next two quarters. Overall, GDP is projected to increase 1.8% in 2022, slow to 0.5% in 2023 and 1% in 2024.
11. Finance, insurance and real estate sectors to contribute roughly $5 trillion to US GDP
According to data from Statista, the finance, insurance and real estate industries made up approximately $4.7 trillion of the United States gross domestic product. Estimates suggest the sectors will account for over $5 trillion in 2023.
12. Government spending to make up 17-18% of GDP
A key component of GDP, government spending in the US, makes up 17-18% of the country’s GDP. According to economists polled by JPMorgan in December 2022, government spending is expected to be a neutral contributor to the GDP in 2023. Although spending on infrastructure, and the CHIPS and Science Act (the US has budgeted for $280 billion towards bolstering its semiconductor capacity) these should be offset by decreased pandemic-related outlays.
13. Real consumer spending is expected to increase by 2% in 2023
Real consumer spending will increase by roughly 2% in 2023, economists have estimated. This projects a 4-5% uptick in wages, while inflation at 3-4%.
14. The US GDP will benefit from business investment going up 3% in 2023
In its ‘Economic Outlook 2023: Trends to watch’ , JPMorgan Head of Research, Commercial Banking Ginger Chambless says the bank expects business investment to increase by 3% in 2023. The economy will see some solid spending in the equipment and technology sectors, the researcher says, but the outlay should also be somehow offset by reduced spending across related infrastructure (buildings and plants etc).
15. Residential investment likely to slow 10-12% in 2023 after contracting 10% in 2022
The residential investment sector, particularly housing, is forecast to contract further in 2023, with expectations that higher interest rates will be felt in this industry. The sector buoys US GDP by about 5% but it could shrink by about 10-12% in the next 12 months, adding to the overall 10% contraction registered in 2022.
16. US economy could shed 1 million jobs in 2023
While the US labour market has shown remarkable recovery from the distortions resulting from the 2020 pandemic, a slower economic environment could impact the market. According to a recent forecast for the sector, the US economy could shed up to 1 million jobs in the next 12 months, with the unemployment rate spiking to 4.3% by the end of the year even as the possibility remains that businesses will maintain a hiring trajectory as a priority over margins.
17. Home sales to fall 15-20% in 2023 after mortgage rates rose roughly 400 bps in 2022
This is because total home sales have historically contracted by about 10% for every 100 basis point rise in mortgage rates. With mortgage rates up approximately 400 bps in 2022, home sales could dip 15-20% in the year and weigh on construction activity and residential investment
18. US import and export price indexes rose 2.7% and 6.3% respectively
According to the Bureau of Labor Statistics, prices for US imports fell 0.6% in November, after decreasing 0.4% in October. For exports, prices declined 0.3% and 0.4% in November and October. However, despite the global macroeconomic outlook, import prices rose 2.7% while export prices increased by 6.3%
19. Net foreign trade is forecast to have a 1% drag to United States’ 2023 GDP
Net foreign trade is one of the trends to watch in the economic outlook 2023 for the United States. As JPMorgan researchers reveal in their forecast, net foreign exports could contribute to a 1% drag to the United States’ gross domestic product in 2023. The outlook will likely be impacted further by a stronger dollar hurting export demand and resulting in a trade deficit.
US inflation outlook
20. Consumer Price Index (CPI) peaked around 9% in June 2022
US inflation spiked from around spring 2021, reaching a four decade’s high level around 9% in June 2022. Factors such as pandemic-driven supply and demand imbalances, fiscal and monetary stimulus and Russia’s invasion of Ukraine contributed. Though inflation remains high, it has cooled to near 7% by the end of 2022.
21. CPI rose 7.1% YoY in November 2022, the lowest since December 2021
According to the US Bureau of Labor Statistics, the US Consumer Price Index (CPI) rose 0.1%, seasonally adjusted, and 7.1% over the past 12 months in November. The annual inflation rate fell for a fifth straight month year-on-year, the 7.1% reading coming in against a forecast of 7.3% and at its lowest since December 2021. Core CPI, which excludes the more volatile food and energy from the readings, came in 0.2% higher and at 6% YoY.
22. US inflation forecast to remain 3x the Fed’s 2% target
While the annual inflation rate slowed in November of 2022, with the CPI edging higher at only 0.1% for a three-month low, projections are for annual inflation to continue hovering at levels 3x or higher than the Fed’s 2% target in the first half of 2023.
23. Fed’s forecast to hike rates by 25 bps in February and March
Analysts say the Fed’s hiking cycle is expected to come to end in 2023, but terminal funds rates are projected to rise to 5%. The scenario is for the central bank to raise rates by another 100bps before next spring, with 25 basis points each in February and March.
24. US central bankers forecast Fed’s policy rate will rise to 5.1% by end of next year
The Fed’s rate hikes reached the 4.25%-4.5% range following another 50 basis point rise in December. With the pace now including a 425 bps hike since March 2022, analysts see the Fed going up to 5.1% by the end of 2023.
25. Fed likely to deliver its first rate cut by December 2023
According to estimates by bankers from Morgan Stanley, Barclays, UBS, Wells Fargo and Bank of America among others, the Fed will begin to cut its benchmark rate in December 2023 or early 2024. The forecast is for US inflation to be close to the 2% target by then for the Fed to begin its easing cycle, with predicted rates in the range of 4.25% and 4.50%. BofA analysts predict interest rates will be down to 2.75%-3.00% by the end of 2024.
26. The Fed’s $95 billion per month quantitative tightening to continue through 2023
The forecast for the Federal Reserve’s ongoing quantitative tightening, or balance sheet reduction, currently sits at $95 billion per month. This includes a paced $60 billion Treasuries and $35 billion reduction in mortgage-backed securities. 2023 projections for this metric have the Fed continuing on this path throughout 2023, which will greatly cut liquidity in the US economy amid increased purchases by private investors.
US dollar and the economy
27. The US dollar was stronger against its peers in 2022, rising an overall 15% since January to hit 20-year highs.
The dollar steadied remarkably against the world’s developed market currencies, with its 15% gains pushing it to a 20-year high. Against top currencies, the greenback rose 9% against the euro, 11% against the sterling and 22% against the yen. The dollar is expected to maintain its strength in 2023, with most of the gains likely to come against emerging market currencies.
28. A stronger dollar will have an impact on the US economic outlook in 2023, with implications for the GDP
A strong dollar will buoy the US economy particularly by making imports cheaper and enabling for lower prices across dollar-denominated commodities including oil, metals and agricultural products. However, it could negatively impact US exports, and hurt internationally-generated revenues for up to 50% of S&P 500 companies. A strong dollar amid a slowing global economy will impact net foreign trade and contribute to a 1% drag on GDP in 2023 and 2024.
The US economic outlook for 2023 is centred more on the impact of high inflation, Fed’s interest rates hikes and monetary tightening. Growth for the country’s economy is also expected to slow down amid broader geopolitical shocks even as the world anticipates the global economy to fall into recession early in the year.
However, the Fed is expected to start cutting rates as inflation shrinks towards the 2% target, while a strong labour market and dollar could aid the economy in late 2023 and into 2024.