Forecast 2024
Navigating a Tricky Economic Terrain
By Phillip M. Perry High-interest rates and slower economic growth will put increasing pressure on business profits in 2024. The good news is that economists expect the Federal Reserve to lower inflation to desired levels by the end of the year. Robust housing activity, high employment and optimistic consumers will help the nation sidestep a recession.
Fasten your seat belts and enjoy the ride. Like airline travelers bracing for expected turbulence, business owners are preparing for a tricky operating environment in 2024. On the upside, the economy will continue to grow, although at a slower pace. Consumers and businesses are both feeling fairly optimistic, unemployment remains low, capital investments are plugging along at a healthy pace, and the all-important housing market is burgeoning. Throwing cold water on the good times, though, is a significant downer that no one can control: higher interest rates established by the Federal Reserve to control inflation are putting a damper on business activity. Economists are taking note by lowering expectations for the next 12 months. “We expect real GDP to grow 1.4 percent in 2024,” says Bernard Yaros, Jr., Assistant Director and Economist at Moody’s Analytics (economy.com). That’s slower than the 2.1 percent increase expected when 2023 numbers are finally tallied and below the 2.0 percent-3.0 percent considered emblematic of normal business growth. (Gross Domestic Product, the total value of the nation’s goods and services, is the most commonly accepted measurement of economic growth. “Real” GDP adjusts for inflation.)
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