J P Morgan predicts real US GDP to expand at 2% pace in H2 2023

“Monetary policy has been restrictive for several months now, and we think the hiking cycle is nearing the end…. We expect the Fed to be on hold through the middle of next year, provided inflation continues on its downward glide path,” J P Morgan said in its mid-year 2023 outlook.

Inflation is moving in the right direction–lower–but has proven to be more persistent than expected through the first half of the year. Over the past few months, falling energy prices have helped reduce headline inflation, while core inflation metrics have witnessed less progress, the outlook noted.

“We expect gradual improvement in inflation over the coming months, though a return to the Fed’s [Federal Reserve] targeted 2 per cent level could take until late 2024,” it said.

Labour markets remain tight, with a low 3.5 per cent unemployment rate; however, some mixed signals are beginning to emerge.

While open jobs and payroll gains remain above long-term averages in recent months, declining labour force productivity metrics, reduced temporary employment and a lower quit rate than a year ago suggest a better balance between supply and demand for labour, J P Morgan said.

Supply chain pressures have dissipated, with lower shipping costs, greater container ship capacity and shorter delivery times, it added.

ALCHEMPro News Desk (DS)