Kavan Choksi Wealth Advisor Discusses Certain Trends Related to the United States Economy

In the face of a historic increase in interest rates by the Federal Reserve, the US economy managed to outperform several expectations over the past year. As Kavan Choksi Wealth Advisor mentions, during the last quarter of 2023 and the first six months of 2024, real U.S. gross domestic product is likely to slow to a rate of 1.6%, and then rise to 1.8% in the final two quarters. The low point might come in the second quarter, when output growth is projected to be at a rate of 1.2%.

Kavan Choksi Wealth Advisor talks about various aspects of the United States economy

Even though the United States economy has performed extraordinarily well under the circumstances in 2023, there are many notable headwinds businesses will face entering 2024, such as:

  • Higher interest rates including mortgage rates are approaching 8%
  • Wage growth is decelerating
  • Student loan repayments restarted in October.
  • Credit card delinquencies have risen steeply over the last 8 quarters
  • Household debt, mortgage debt and auto loan debt are rising
  • A weakened dollar will make imports more costly

Due to the conditions mentioned above, and many other trends, the consumer spending portion of GDP is expected to erode fast. Owing to the sluggish growth in Europe and China, the global economy is also cooling.

Diverse sectors and industries play a key role in shaping the US economy. These industries are facing distinctive opportunities and challenges.

  • Manufacturing: Even though manufacturers in US aspire to build more “smart factories,” not many have the capability to do so. While more than fifty percent of manufacturers plan to increase automation in the next year, a number of them face challenges in finding engineers and equipment. Moreover, even though supply chains have normalized, they are still fragile. Onshoring and nearshoring is taking longer than expected, as new infrastructure and logistics hub must be built to support demand.
  • Construction: There are pockets of opportunity in the sector, even though this industry is constrained by high-interest rates.  The construction sector is unique in the regard that subcontractors and tradesmen may simply shift from one industry to another, typically the ones supported by infrastructure spending. A bright spot in the domain is manufacturing construction.
  • Consumer goods: Fueled by a range of supply chain innovations, the consumer packaged goods (CPG) industry is undergoing a major transformation. Concerns in regard to holding inventory and changing customer expectations have accelerated competition levels.  Amidst new home sales, the home improvement sector has become sluggish.
  • Energy:  Three bills, the Infrastructure Investment and Jobs Act, CHIPS and Science Act, and Inflation Reduction Act, appropriate more than $500 billion to clean energy initiatives over the next decade or so. Such investments are the impetus to radical shifts in U.S. energy policy, and the conflicts in the Middle East will only fuel the fire on higher oil prices that shot up to $80 per barrel.

As Kavan Choksi Wealth Advisor mentions, unless there is a significant black swan, the chances of a recession are not too high in the near future. However, it is likely to be some time before the Fed reduces rates, and therefore the country is in for a sustained period of slow growth. Businesses have to be selective in the sectors they take part in and protect their margins,

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