There is still a high probability that the US economy will tip into a recession in 2024, analysts at Societe Generale warn. A slight decline in inflation did not make much difference, although the average income of most American households remained at a decent level in 2023.
Cooling inflation may have prevented an earnings slump, but that will not last long, the bank assumed. Investors are simply expecting too much from markets and the economy this year, currency strategists said.
Thus, despite recent signs of stabilization, the US remains on the verge of an economic downturn.
Societe Generale attributes stubborn inflation to a number of factors. Among them are companies keeping prices high to protect their profit margins. Last year's price hikes by organizations helped avoid a deeper slide in revenues, the French bank said in a note.
Nevertheless, the US economy can hardly boast stunning resilience. A surge in margins posted in 2023 enabled firms to mitigate a slowdown in earnings and elude a serious downturn. However, that "derailed a recessionary slump in business investment," the bank emphasized. At the same time, price increases are unlikely to prop up markets this year as consumers may not be able to withstand another price hike. In the current situation, investors should not expect too much from the economy and markets, analysts warn.
Currently, many market participants are betting on multiple Federal Reserve interest rate cuts. However, the current year may bring quite a lot of surprises, Societe Generale predicts. Some sectors of the US economy fell into a recession. US manufacturing activity receded for the 14th straight month in November.
Earlier it was reported that US inflation had fallen sharply from its 2022 peak. The consumer price index increased by 3.4% in December 2023 from a year ago, far below a 9% jump seen in June 2022.
