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Friday, May 24, 2024
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2024: What Should We Expect?

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As we enter a new year, the economy is better positioned than 12 months ago in many ways. Image for Illustration purposes
As we enter a new year, the economy is better positioned than 12 months ago in many ways. Image for Illustration purposes
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Dr. M. Ray Perryman President and Chief Executive Officer of The Perryman Group

Looking back at 2023 (or 2022, 2021, or 1687 for that matter) confirms that there are always unanticipated events in the economy, no matter how many millions of equations or thousands of hours of research a forecast involves. Nonetheless, there are trends that can be anticipated that will be key drivers of economic growth in 2024. Let’s take a brief look. 

As we enter a new year, the economy is better positioned than 12 months ago in many ways. Back then, prices were still on a fairly steep upward trajectory even though the Federal Reserve had been raising its target interest rate at an historic pace. Now, inflation has moderated, and there hasn’t been an interest rate hike since the summer. In fact, the Fed has indicated that decreases will come this year, and some key rates are already falling. As always, the timing of these actions will be driven by ongoing data related to the twin mandates of maximum employment with low inflation. The sooner we can transition to rate cutting and easing, the faster the pace of expansion will be. My expectation is that, barring a major shock, we will see cuts relatively soon. That will also help the real estate lending situation, which will likely generate some headlines in the coming months.

Geopolitical tensions will be another driver of economic growth patterns. Uncertainty is a challenge for the economy, and major escalation of the situations in the Middle East or Russia/Ukraine would slow investment, spending, and positive trends. There are other issues that could worsen. Venezuela has indicated it will seek to take disputed territory in neighboring Guyana, where substantial oil reserves are under development offshore, and disruptions have occurred in Red Sea shipping channels. These and other trouble spots could cause disturbances ranging from higher energy prices to disrupted trade flows. Most of the trade passing through the Red Sea affects Europe and Asia more than the US, but long-term interruptions could impact domestic supply chains.

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Another source of uncertainty is the upcoming election. Neither the best nor the worst scenarios which are being touted will likely come to fruition irrespective of the ultimate outcome, but there will clearly be significant implications for policy. Future growth is dependent to some extent on how things play out, but I don’t anticipate the ultimate variation to be dramatic (despite the headlines and rhetoric, it is rare that major movements can be validly linked to election results). 

The resilience demonstrated by the economy through 2023 has positioned us well for sustainable growth. Relaxing monetary policy while keeping inflation under control will bolster prospects. As always, there will be some surprises, but the underlying patterns are generally positive. Stay safe!  

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Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 3,000 clients over the past four decades.

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