The United States: Economic Soft-Landing Scenarios and Current Economic Situation
2024-03-04
■ The US economy continues to exceed potential growth rates and is expected to remain strong from January to March
■ At the same time as the slowdown in consumption and employment growth, the cyclical recovery of manufacturing activities may influence the scenario of an economic soft landing
According to the revised US real GDP growth rate from October to December last year, released on February 28th (at an annual rate of 3.2%), although there was a slight decrease compared to the initial value (3.3%), the growth rate still exceeded the potential growth rate after showing high growth in the early stage (4.9%). The main reason for the downward adjustment is inventory investment, while the main demand items such as government expenditure and personal consumption are increased. The Atlanta Federal Reserve Bank's GDP Now, a real-time forecast indicator of GDP, shows that the January-March period (as of February 29, 3.0%) is also expected to maintain growth above potential growth rates, so signs of economic strength since the beginning of the year continue.
Taking into account multiple economic indicators such as the Leading Economic Index (LEI), the Consistent Economic Index (CEI), and the Chicago Federal Reserve Bank's National Activity Index (CFNAI), this study provides a supplementary explanation of the current economic trend in the United States from a cyclical and trend perspective. Looking at the latest data for January, LEI (down 0.4% month-on-month) has been declining since March 2022, while CEI (up 0.2% month-on-month) has continued to rise. The deviation between the two indicators is because LEI is mainly composed of manufacturing order-related indicators, labor-related indicators, and financial market data, while CEI is mainly composed of household and employment-related indicators, with manufacturing and commercial sales (retail and wholesale sales, etc.) accounting for over 50%. Despite weak growth in manufacturing orders, the expansion of consumption and employment is still supporting the current economic expansion. The annual decline rate of LEI has begun to shrink, and according to the Conference Board's assessment of the importance of the six months ago ratio, six out of six indicators have contributed to growth, indicating signs of a cyclical recovery. In addition, CFNAI (-0.30) has been negative for three consecutive months, but the three-month average (-0.02) showing the trend is the highest level in a row since November 2022. The negative amplitude shows the degree of deviation (standard deviation) from the growth trend, although slightly lower than the past trend, it is returning towards almost equal growth rates. These results are roughly consistent with the economic soft-landing scenario envisioned by the Federal Reserve (FRB) and experts. Due to the expected gradual slowdown in the expansion rate of personal consumption and employment, it is expected that the feeling of economic slowdown will strengthen after the April-June quarter. Therefore, the cyclical recovery of the manufacturing activities (such as capital consumption, investment, and external demand in demand items) will influence the development of this scenario.
■ At the same time as the slowdown in consumption and employment growth, the cyclical recovery of manufacturing activities may influence the scenario of an economic soft landing
According to the revised US real GDP growth rate from October to December last year, released on February 28th (at an annual rate of 3.2%), although there was a slight decrease compared to the initial value (3.3%), the growth rate still exceeded the potential growth rate after showing high growth in the early stage (4.9%). The main reason for the downward adjustment is inventory investment, while the main demand items such as government expenditure and personal consumption are increased. The Atlanta Federal Reserve Bank's GDP Now, a real-time forecast indicator of GDP, shows that the January-March period (as of February 29, 3.0%) is also expected to maintain growth above potential growth rates, so signs of economic strength since the beginning of the year continue.
Taking into account multiple economic indicators such as the Leading Economic Index (LEI), the Consistent Economic Index (CEI), and the Chicago Federal Reserve Bank's National Activity Index (CFNAI), this study provides a supplementary explanation of the current economic trend in the United States from a cyclical and trend perspective. Looking at the latest data for January, LEI (down 0.4% month-on-month) has been declining since March 2022, while CEI (up 0.2% month-on-month) has continued to rise. The deviation between the two indicators is because LEI is mainly composed of manufacturing order-related indicators, labor-related indicators, and financial market data, while CEI is mainly composed of household and employment-related indicators, with manufacturing and commercial sales (retail and wholesale sales, etc.) accounting for over 50%. Despite weak growth in manufacturing orders, the expansion of consumption and employment is still supporting the current economic expansion. The annual decline rate of LEI has begun to shrink, and according to the Conference Board's assessment of the importance of the six months ago ratio, six out of six indicators have contributed to growth, indicating signs of a cyclical recovery. In addition, CFNAI (-0.30) has been negative for three consecutive months, but the three-month average (-0.02) showing the trend is the highest level in a row since November 2022. The negative amplitude shows the degree of deviation (standard deviation) from the growth trend, although slightly lower than the past trend, it is returning towards almost equal growth rates. These results are roughly consistent with the economic soft-landing scenario envisioned by the Federal Reserve (FRB) and experts. Due to the expected gradual slowdown in the expansion rate of personal consumption and employment, it is expected that the feeling of economic slowdown will strengthen after the April-June quarter. Therefore, the cyclical recovery of the manufacturing activities (such as capital consumption, investment, and external demand in demand items) will influence the development of this scenario.