2023 Forecast (CONT’D FROM PAGE 26)
noted Palisin. “The war has created an energy crunch and a disruption in raw materials from that region that have trickled through the economy to exacerbate the supply chain issues.” Companies are responding by moving to re- duce their reliance on China, he added. “They’re sourcing from additional countries to reduce disruptions.” Housing Headwinds Housing, a key driver of the economy, has also en- tered a period of correction. “The underlying dynamics
post-pandemic consumers to shell out less cash on mer- chandise and more on services such as hotels, travel and restaurants. Any softening of inflation from recent highs should also depress results, since retail activity is mea- sured in nominal terms. Supply Chain Disruptions Higher wages and scarce workers are not the only forc- es depressing business profits. Another major factor is a rise in interest rates—the Fed’s favorite tool for fighting in- flation. “The purpose of increasing interest rates is to drive down demand,” said Palisin. “So, our members are expect- ing to see a decrease in new orders that will impact the overall economy. Too, many of our companies have lines of credit that rely on floating interest rates. Rising rates will take a hit to the bottom line as companies decide whether to utilize those lines to support their cash flow and invest- ments.” Adding further downward pressure are disruptions in the delivery of goods that continue to plague companies large and small. “Supply chain problems have improved over the past year, but there hasn’t been the significant resolution we had hoped for,” said Palisin. “Random short- ages in materials and deliveries are still plaguing our mem- bers, and that’s leading to backlogging of orders—compa- nies just can’t get the materials or parts.” The Russia-Ukraine war has worsened the situation,
of the housing market are changing as lower affordability spurred by higher prices and mortgage rates is starting to significantly weigh on demand,” said Yaros.
CONTINUED ON PAGE 30
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