Swiss Re Institute has raised its forecast for US economic growth in 2024 to 2.2%, citing significant “carry-over effects” from the previous year’s strong performance.
This revision reflects a statistical phenomenon where prior year growth dynamics influence current-year forecasts. Despite the upward adjustment, concerns loom over whether the insurance sector will reap the benefits of this growth surge.
The US economy ended 2023 with a robust 3.3% growth rate, leading to a sizable 1.3% carry-over effect into 2024.
However, Swiss Re warns that this mechanical uplift masks an anticipated slowdown in economic activity.
Factors such as waning consumer and corporate demand, limited monetary easing, and asset price volatility could pose challenges for insurers operating in the US market.
While the headline forecast suggests a buoyant outlook for the US economy, Swiss Re emphasises a more subdued reality, anticipating four quarters of below-trend growth.
In contrast, the euro area is expected to experience minimal carry-over effects, with stagnant growth in 2023 contributing to a forecasted 0.3% growth for 2024.
The Institute highlights three implications for the insurance and wider financial sectors. Firstly, it anticipates gradual and limited policy easing from the Federal Reserve amidst persistent economic momentum.
Secondly, it warns of potential financial market repricing and volatility as economic data may fall short of resilient headline forecasts.
Lastly, Swiss Re cautions that despite the statistical uplift in GDP, businesses and consumers are likely to perceive a slowdown, with high interest rates and sticky inflation affecting their financial decisions.
Amidst the projections of economic growth, Swiss Re’s report underscores the importance for insurance companies to recognise the underlying dynamics and plan accordingly for potential challenges in the US market.
