Economic Forecast For 2024: Recession Now Unlikely

2024 economic forecastgetty The 2024 slowdown will probably not be recession, though that’s certainly a possibility. I had previously predicted a recession, of mild magnitude, beginning in late 2023 or early 2024. This forecast retreats from that prediction. Why a recession did not materialize helps to understand the economic outlook going forward. The usual time lag between changes in monetary policy and changes in the overall economy—spending, production and employment—is about one year. But lags can be longer or shorter, and every episode is unique. There are no cookie-cutter business cycles. Reasons A Slowdown Was Delayed Four factors explain a longer time lag for the negative effects of the Federal Reserve’s tightening. First, automobile and light truck sales usually fall when interest rates rise, leading to cutbacks in production. This time around, though we had pent-up demand for new cars due to past supply chain problems. Cars became more available in 2023 and prices even declined a bit. But with the pent-up demand mostly satisfied, look for sales to come down in 2024. That will be accentuated by a mis-match between production and demand for electric vehicles. The second delay comes from business capital spending, which usually declines when the Fed tightens. Part of the decline results from the higher cost of capital, and part from weaker expectations for future demand that accompany monetary tightening. This cycle, however, companies had placed orders for computers, equipment and machinery to make up for workers they had trouble hiring. The third delay also relates to the tight labor market. Some people who were laid off found new work right away, having driven past “help wanted” signs for months. That was not true for all people who had been displaced, but true enough to delay cutbacks in consumer spending. MORE FOR YOU This […]

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By Donato