Economy, weather, and CO₂

U.S. macroeconomics
Our forecast for April 2024 assumes real GDP will grow by 2.5% in 2024 and 1.5% in 2025, mostly unchanged from the forecast in March. Our U.S. macroeconomic forecasts are based on S&P Global’s macroeconomic model. We incorporate STEO energy price forecasts into the model to obtain the final macroeconomic assumptions.

Overall, the macroeconomic forecast we use for the STEO is similar to last month. However, the small upward revision to the forecast for the Consumer Price Index (CPI) is notable. Inflation, measured as the year-over-year growth rate of the CPI, declined from a peak of 9.0% in June 2022 to 3.2% in February 2024. Our forecast assumes that CPI inflation will continue to decline but will not reach 2.0% until the first quarter of 2025 (1Q25). We previously assumed CPI inflation would reach 2.0% by 3Q24, two quarters earlier. Therefore, forecasts on monetary policy have also been revised by other agencies. We now assume that the U.S. Federal Reserve will wait until June, as opposed to May, to reduce its target for the Federal Funds Rate.

Our forecast assumes the unemployment rate will rise gradually, reaching 3.8% by the end of 2024 and 4.2% by the end of 2025.

Emissions
Total U.S. energy-related carbon dioxide (CO₂) emissions decrease by 1% in 2024 in our forecast, driven exclusively by a decrease in coal consumption. Coal-related CO₂ emissions decline by 8% as a result of decreasing coal-fired electricity generation. As coal-fired electricity generation declines, several other generation sources grow, most notably solar. Natural gas and petroleum-related CO₂ emissions both increase by about 1%; slight increases in the electric power sector’s natural gas consumption are partly offset by decreased consumption in the industrial sector, and petroleum product consumption rises slightly. CO₂ emissions are expected to decrease by an additional 1% in 2025 driven by slight decreases in total consumption of coal, natural gas, and petroleum products.

Decreasing CO₂ emissions in our STEO forecast are consistent with emissions trends observed over the last several years. However, analysis of emissions by fossil fuel component provides valuable insights into the nature of these reductions. Petroleum and natural gas are the two largest sources of U.S. energy-related CO₂ emissions. However, most emissions reductions in recent years come from coal, which represents the smallest share of total emissions. This trend in decreasing coal-related CO₂ emissions is observed largely in the electric power sector, where decreases in coal-fired generating capacity contribute to notable decreases in domestic coal consumption.

Weather
March 2024 was milder than March 2023. The United States averaged 500 HDDs in March, 15% fewer HDDs than in March 2023, which contributed to an overall relatively mild winter season (November 2023–March 2024). We expect 2Q24 and 3Q24to be hotter in 2024 than it was last year, with 7% more CDDs than the same period in 2023.