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S&P Global U.S. Forecast Update September 2023

Sept. 13, 2023
By Delaney O’Kray-Murphy, EBRC Research Economist

Greater unemployment required to achieve 2% inflation

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 S&P Global have released their September 2023 forecast update for the U.S. The current forecast is based on the following assumptions:

  • The forecast includes the Fiscal Responsibility Acts of 2023. The forecast reflects current corporate tax law and personal income tax policy. Pandemic-era programs expire on time (Child Tax Credit, SNAP extension, Medicaid increase). It does not include the cancellation of any student debt but assumes that student loan forbearance expires at the end of August.
  • The Fed is assumed to raise its policy rate to a range of 5.50%-5.75% by November. It temporarily overshoots the terminal range of 2.5%-2.75%. The Fed’s balance sheet declines by about one-third through 2024.
  • Tariffs and trade agreements between the U.S. and China since 2017 are assumed to continue.
  • Real foreign GDP contracted by 4.7% in 2020. Growth rebounded to 5.6% in 2021 and then decelerated to 3.3% in 2022. The forecast calls for it to slow again in 2024 to 2.0% then rebound to 2.5% by 2025.
  • The price of Brent crude oil rose to $113 per barrel in the second quarter of 2022, up from $80 per barrel in the fourth quarter of 2021. The price is forecast to drop to $82 per barrel in 2024-2025, in response to slowing global growth.

The baseline forecast (summarized here) is assigned a 55% probability. The pessimistic scenario is assigned 30% and the optimistic scenario is assigned the remaining 15%. The pessimistic scenario is five percentage points higher compared to August, and the optimistic scenario is five lower.

After increasing by 2.1% in 2022, the baseline forecast calls for real GDP growth to edge up to 2.3% in 2023 and drop to 1.5% in 2024. The economy is projected to be stronger in 2023 than last month, reflecting more robust underlying data released recently. On a quarterly basis, the forecast calls for real GDP to increase through 2033 (no recession).

Headline inflation spiked in 2022 to 8.0%. It is forecast to decelerate to 4.1% in 2023 and 2.7% in 2024.

The unemployment rate peaked at 8.1% for the year in 2020 but fell to 5.4% in 2021 and again to 3.6% in 2022. It is forecast to remain at 3.6% in 2023 and rise to 4.0% in 2024.

Nonfarm payroll jobs nationally dropped by 5.8% in 2020 but rebounded with growth of 2.9% in 2021 and 4.3% in 2022. The forecast calls for jobs to rise by 2.2% in 2023 and 0.2% in 2024.

Housing starts surged in 2021 to 1.61 million units. Activity remained strong in 2022 at 1.55 million. The forecast calls for starts to drop to 1.42 million in 2023 and 1.38 million in 2024, as interest rate increases take a toll on housing activity.

Exhibit 1 summarizes the September 2023 forecast from S&P Global. Exhibit 2 shows the August 2023 projections and Exhibit 3 shows the difference.

Exhibit 1: S&P Global September 2023 Forecast for the U.S., Over-the-Year Percent Change or Level

S&P Global September 2023 Forecast for the U.S., Over-the-Year Percent Change or Level

Exhibit 2: S&P Global August 2023 Forecast for the U.S., Over-the-Year Percent Change or Level

S&P Global August 2023 Forecast for the U.S., Over-the-Year Percent Change or Level

Exhibit 3: Differences in S&P Global U.S. Projections: September 2023 Versus August 2023 (Percentage Point Differences, Except for Housing Starts)

S&P Global August 2023 Forecast for the U.S., Over-the-Year Percent Change or Level