“Nasdaq’s commanding presence in the stock market takes a hit as Big Tech giants face mounting pressure, triggering a compelling slide that keeps investors on the edge.”
The latest GDP print for the US economy has shown a significant increase in growth, but economists are cautioning against assuming that this means the economy is out of the woods. According to experts, factors such as a fall in the saving rate, a rise in government spending, and a jump in inventory accumulation have contributed to the recent surge in activity, but these factors are not sustainable in the long term.
Furthermore, economists are pointing out that monetary tightening is starting to have an impact on investment spending. With financial conditions still tightening, a sharp downturn is expected in the coming quarters. EY Chief Economist Gregory Daco emphasizes that while the signs of economic strength may lead to speculations of reacceleration, it is unlikely that such momentum will be sustained.
The recent tightening of financial conditions, driven by surging bond yields, poses a significant challenge to business investment and consumer spending. Additionally, tighter credit conditions, the restart of student loan payments, the impact of monetary policy, and a fragile global economic backdrop will likely result in real GDP growth falling below trend for several quarters. Analysts predict a muted growth rate of 1.4% in 2024, following an expected growth of 2.4% in 2023.
The upcoming Federal Reserve policy meeting will consider the GDP figure among other data. While this news may not be ideal for the Federal Reserve, the fact that the disinflationary process has continued on a year-earlier basis could alleviate some pressure. Raymond James’ Chief Economist Eugenio Aleman suggests that this could provide some relief for the central bank.
In conclusion, while the recent GDP growth is positive, economists are urging caution and highlighting potential challenges that lie ahead. The sustainability of the current growth rate is uncertain, and various factors such as monetary tightening and global economic conditions could impact future growth.