Forecast 2024 (CONT’D FROM PAGE 26)
any dramatic adjustments to their operations, in marked contrast to their cautious attitude of a year earlier. “While our members have moderated their expecta- tions for the future, they are still feeling slightly positive,” said Palisin. “One reason is that we seem to have avoided the recession that many were predicting.” Moody’s Analyt- ics believes that the nation will avoid a recession in 2024, attributing its forecast of a soft landing to resilience in la- bor markets and consumer confidence. Another driver of optimism is a recent brightening of the supply chain picture. “There has definitely been a shift in the awareness of the risks of doing business in China,” said Palisin. “This has resulted in a reorganizing of supply chains into nations such as Vietnam, Philippines, India, Mexico and the U.S. The jury is still out as to what nations will benefit most.” Indeed, many businesses are taking action on their good feelings. “The commercial sector looks very strong to me,” said Conerly. “Given the current level of interest rates, I’ve been surprised to see the healthy level of capital spending.” Conerly said that manufacturing facilities seem to be the biggest gainers in non-residential construction, with new semiconductor facilities especially benefitting from the CHIPS Act. Suburban office construction has been doing surpris- ingly well, despite vacancy rates in urban centers. So have
remains well below the four to six months of inventory that is considered a balanced housing market,” noted Yaros. Strong demand caused a 10.3 percent increase in the me- dian price for existing homes in 2022, and a 0.6 percent increase in 2023. A correction of 1.1 percent is expected in 2024. For an explanation of the scarcity, look no further than the run-up in mortgage rates. The ultra-low interest rates of existing mortgages amount to a strong financial incen- tive for existing homeowners to stay put. “Current homeowners had refinanced their investments at 3 percent or 4 percent,” noted Conerly. “Replacing what they had with better homes would require walking away from those mortgages to take on new ones at 7 percent. I think we’ll see this trend continue for another year, but I think we'll also see a lot of strength in remodeling, and that will be financed probably with home equity lending or High interest rates, an inflationary environment, and rising worker wages: a trilogy of challenges that in normal times would dampen business confidence. And there are other threats to corporate well-being, such as high energy costs resulting from the Russia-Ukraine war and an appre- ciation in the U.S. dollar that hampers export activity. Despite all this, companies don’t seem to be planning second mortgages.” Business Confidence
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