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1 Mark Lasky, An Update to the Economic Outlook: 2023 to 2025 1 (July 26, 2023)

handle is hein.congrec/udetteeco0001 and id is 1 raw text is: T he Congressional Budget Office periodically updates its economic forecast to ensure that its projections reflect recent economic devel- opments and current law. This report provides details about CBO's most recent projections of the econ- omy through 2025, which reflect economic developments as of June 22, 2023 (see Table 1). Over the 2023-2025 period, in CBO's latest projections: - Economic growth slows and then picks up. The growth of real (inflation-adjusted) gross domestic product (GDP) slows to a 0.4 percent annual rate during the second half of 2023; for the year as a whole, real GDP increases by 0.9 percent. After 2023, growth accelerates as monetary policy eases. Real GDP increases by 1.5 percent in 2024 and by 2.4 percent in 2025. That initial slowdown in economic growth drives up unemployment. The unemployment rate reaches 4.1 percent by the end of 2023 and 4.7 percent by the end of 2024 before falling slightly, to 4.5 percent, in 2025. Payroll employment declines by an average of 10,000 jobs per month in 2024 and rises by an average of 6,000 jobs per month in 2025. Inflation continues to gradually decline. Growth in the price index for personal consumption expenditures (PCE) slows from 3.3 percent in 2023 to 2.6 percent in 2024 and 2.2 percent in 2025. That slowdown reflects several factors, including softening labor markets and flagging growth in home prices (and even declines in some regions), which passes through to rents. The Federal Reserve further increases the target range for the federal funds rate (the interest rate that financial institutions charge each other for overnight loans of their monetary reserves) in mid- 2023. It begins reducing that target range in the first half of 2024, as inflation continues to cool. The federal funds rate declines from 5.4 percent in the fourth quarter of 2023 to 4.5 percent in the fourth quarter of 2024 and 3.6 percent in the fourth quarter of 2025. Gross Domestic Product and Its Components In CBO's projections, which reflect the assumption that current laws governing federal taxes and spending generally remain unchanged, most components of GDP grow slowly in 2023, and real residential investment and real inventory investment both decline (see Table 2). After 2023, the growth of real GDP accelerates. Consumer Spending CBO expects growth in real consumer spending to weaken in late 2023 as rising interest rates, tighter lend- ing standards, rising unemployment, and diminished support from savings accumulated during the corona- virus pandemic cause consumers to pull back. Consumer spending is then expected to strengthen in late 2024 as interest rates decline and in 2025 as both interest rates and unemployment decline. In the agency's projections, real consumer spending increases by 1.3 percent in 2023, by 1.1 percent in 2024, and by 2.0 percent in 2025. CBO expects that the shift in spending from goods to ser- vices that began in mid-2021 will continue, as consum- ers approach patterns of consumption observed before Notes: Unless this report indicates otherwise, annual growth rates are measured from the fourth quarter of one year to the fourth quarter of the next. Numbers in the text and tables may not add up to totals because of rounding. This report will not be accompanied by updated budget projections.

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