USA: Has the economy passed its current peak?
2023-10-04
■ The United States is expected to exceed potential growth rates in the July-September quarter, but growth will slow down after the October-December quarter.
■ The recovery of student loan repayments and budget negotiations in the US Congress will affect the situation of an economic soft landing.
The US economy has shown strong performance in terms of personal consumption and employment trends. According to the GDPNOW data released by the Federal Reserve Bank of Atlanta, it is expected that the real GDP growth rate in the United States (estimated as of September 29th, a year-on-year increase of 4.9%) will far exceed the potential growth rate in the July-September quarter. However, the July-September quarter may be the peak period of current growth, and the following October-December quarters may witness a slowdown in growth rate. According to Bloomberg's expert forecast (as of September 29, median data), the year-on-year annual growth rate for the quarter from October to December 2023 is 0.5%, the quarter from January to March 2024 is 0.1%, and the quarter from April to June 2024 is 0.6%. It is expected to maintain a low growth rate of less than 1% in the first half of 2024. From a qualitative perspective, after October, the US economy will face multiple restraining factors.
The first point is the restoration of student loan repayment. Due to the US Supreme Court ruling on June 30th that exempting student loans was unconstitutional, as well as the fiscal liability law passed in early June to extend the debt limit, the repayment grace period ended at the end of August, with interest accumulating from September and repayment restarting from October. The main target is the low to middle-income group, whose disposable income will essentially decrease, which may suppress consumption.
The second point is budget negotiations in the United States Congress. On September 30th, the US Congress passed a bipartisan interim budget in both houses, signed by the President, to avoid the closure of US government agencies for the new fiscal year starting on October 1st until November 17th. However, conservative Republicans strongly oppose that unless there is a compromise, they may face similar issues again in November. If the salaries of government employees and military personnel stop paying, the payment of entrusted business is suspended, and the approval of various administrative departments is delayed, which leads to the stagnation of economic activities, it may affect the rise of the private sector's funding costs, and may even lead to the credit rating agencies to reassess the credit rating of U.S. bonds.
In addition, the expansion of labor negotiations such as the National Automobile Union (UAW) in the United States, as well as the recent increase in crude oil prices and interest rates, may increase economic repression and inflationary pressures. The economic soft-landing predictions of the US Treasury and Federal Reserve may be influenced by the extent of the aforementioned impact.
■ The recovery of student loan repayments and budget negotiations in the US Congress will affect the situation of an economic soft landing.
The US economy has shown strong performance in terms of personal consumption and employment trends. According to the GDPNOW data released by the Federal Reserve Bank of Atlanta, it is expected that the real GDP growth rate in the United States (estimated as of September 29th, a year-on-year increase of 4.9%) will far exceed the potential growth rate in the July-September quarter. However, the July-September quarter may be the peak period of current growth, and the following October-December quarters may witness a slowdown in growth rate. According to Bloomberg's expert forecast (as of September 29, median data), the year-on-year annual growth rate for the quarter from October to December 2023 is 0.5%, the quarter from January to March 2024 is 0.1%, and the quarter from April to June 2024 is 0.6%. It is expected to maintain a low growth rate of less than 1% in the first half of 2024. From a qualitative perspective, after October, the US economy will face multiple restraining factors.
The first point is the restoration of student loan repayment. Due to the US Supreme Court ruling on June 30th that exempting student loans was unconstitutional, as well as the fiscal liability law passed in early June to extend the debt limit, the repayment grace period ended at the end of August, with interest accumulating from September and repayment restarting from October. The main target is the low to middle-income group, whose disposable income will essentially decrease, which may suppress consumption.
The second point is budget negotiations in the United States Congress. On September 30th, the US Congress passed a bipartisan interim budget in both houses, signed by the President, to avoid the closure of US government agencies for the new fiscal year starting on October 1st until November 17th. However, conservative Republicans strongly oppose that unless there is a compromise, they may face similar issues again in November. If the salaries of government employees and military personnel stop paying, the payment of entrusted business is suspended, and the approval of various administrative departments is delayed, which leads to the stagnation of economic activities, it may affect the rise of the private sector's funding costs, and may even lead to the credit rating agencies to reassess the credit rating of U.S. bonds.
In addition, the expansion of labor negotiations such as the National Automobile Union (UAW) in the United States, as well as the recent increase in crude oil prices and interest rates, may increase economic repression and inflationary pressures. The economic soft-landing predictions of the US Treasury and Federal Reserve may be influenced by the extent of the aforementioned impact.