US Economic Summary & Outlook: December 2023

While most economic indicators continue to point to a moderating economy, they generally remain at fairly reasonable levels, suggesting that the US economy should maintain a solid footing in 1Q24.

The M2 money supply has now recorded 12 consecutive months of YoY declines, yet rapid declines in the Fed’s RRP facility are acting to offset Fed tightening.

Inflation is rapidly dissipating, with 6-month annualised headline, core and supercore PCE growth all at 2% or below in November. With another large fall in gasoline prices in December expected to support another month of low headline PCE growth, a continuation in current 6-month average growth rates could see headline PCE growth hit 2% YoY in February 2024.

Whether it be private job growth, cyclical employment, or hours worked, the US employment market is showing a broad weakening. Nevertheless, most indicators remain at fairly solid levels, meaning that a further material weakening would be needed to spark major economic concerns.

Real GDP growth was strong in 3Q23, with growth continuing to be underpinned by personal consumption expenditures as real income growth now benefits from falling inflation and a continued low unemploymen…