Summary
The national economy appears to be settling into a soft landing in response to the Federal Reserve’s interest rate increases. The recently released report of an annualized first quarter US real gross domestic product (GDP) growth of 1.4 percent represents a dramatic downward shift from the strong growth in the second half of 2023. The rate of inflation based on the all-items Consumer Price Index (CPI) declined to 3.0 percent for the 12 months ending June 2024, after peaking at 9.0 percent in June 2022. Our baseline national forecast is that the Federal Reserve (FED) will begin lowering interest rates by December, possibly as early as September with continued favorable inflation reports. Based on the national outlook by S&P Global in July, annual real GDP growth is forecast to drop from 2.4 percent in 2023 to below-potential growth of 1.6 percent in 2024. Core inflation is expected to drop below 3 percent in the second half of 2024 on its path towards the FED’s target of 2 percent. Slowing growth in national economic activity is expected to spill over into Oklahoma. Total nonfarm wage and salary employment growth is forecast to slow from 2.9 percent in 2023 to 1.8 percent in 2024, with wage and salary income growth forecast to slow from 7.8 to 6.1 percent. Continued strong population growth is expected though in response to strong employment growth over the past two years.
National Economic Outlook
Following real GDP growth of nearly 5 percent in the third quarter of 2023 and 3.4 percent in the fourth quarter, real GDP growth fell to 1.4 percent during the first quarter of 2024 (Figure 1). With long-run trend growth in real GDP commonly believed to be about two percent, this marks a shift from above-trend growth to below-trend growth. S&P Global forecasts below-trend
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US GDP Growth
US GDP Level
Figure 1. US Real GDP ($2017) (Right axis-level in $billions). (Left Axis-annualized percent growth rate) (History through 2024Q1)
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