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Economic growth slows as recessionary conditions loom

December 15, 2023

Current Trends

The pace of hiring slowed in October and a decline in retail spending suggests that mounting headwinds are finally beginning to slow consumer activity. Business sector growth is also waning in the face of more restrictive credit conditions and rising interest rates. These factors along with softer inflation readings in October support our view that the Fed is done tightening rates for this cycle and will allow tighter financial conditions to cool the economy further. Equity markets roared back sharply in November from October’s downdraw with long-term interest rates falling moderately from recent peaks.

Current Scorecard Infographic for November 2023.Future Scorecard Infographic for November 2023.

Future Outlook

Overall activity slowed in October as headwinds for consumers and businesses have finally tamped down spending and the pace of hiring. Higher interest rates and a tighter credit environment should lead to job and investment cuts by businesses, driving a further deterioration of consumer metrics in the months ahead. We foresee a relatively short and mild recession in 2024, focused on the second quarter. The Fed is likely to only gradually reduce interest rates, with lingering inflation pressures resulting in an extended period of restrictive monetary policy — a downside risk for a deeper downturn than currently projected.


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