If you’ve got a question about the impact of the economy on your business, then Dr. Chris Kuehl likely has the answer. He has become the go-to thought leader for the systems integration industry.
In July 2022, he led another webinar for NSCA members—Now What? Expectations for 2022 and Beyond—to talk about opportunities and challenges posed by the current economy. In other words: What’s coming next? If you missed the webinar, you can watch it here at any time. We’ve also recapped some of the highlights below.
Understanding Recession & Inflation
Although the United States is currently experiencing a downturn, a full-blown recession isn’t a given, but there will definitely be recessions within sectors. Certain parts of the economy will see several quarters of loss while others continue to grow.
Before previous recessions, certain markers were in place to indicate recessionary conditions. So far, what he sees today (things like continued GDP growth, inflation increasing energy and food prices, the Russia-Ukraine conflict, etc.) isn’t consistent with the markers that typically indicate a recession.
In terms of inflation, Dr. Kuehl expects that number to drop as the year goes on, reaching a moderate level in 2023.
Business Is Booming
Even adjusted for inflation, retail numbers are up. Travel is up as well, as we see signs of airlines, theme parks, and hotels across the country being overwhelmed with business. Consumers are spending despite inflationary pressure.
Despite all of this, there are still no signs of consumer overspending. The ratio of household spending between goods and services has returned to pre-pandemic ratios.
Credit card debt as a percent of household income is still not showing signs of overspending. Credit card delinquency rates are also not showing a significant change relative to the last two years. They remain historically very low.
If consumers continue to use credit cards at rates set in March, then they will return to pre-recession levels. The implication is this: If food and energy inflation continue to be high, then it could lead to a drop in consumer spending at some point prior to peak retail season (which is just around the corner).
Although some segments are slowing down in terms of construction, construction growth was at 11.7% in July, with manufacturing experiencing the fastest growth followed closely by commercial space with the return to office.
The Impact of the Infrastructure Bill
To date, the infrastructure bill has funded 400 projects. That figure will continue to accelerate late in 2022 and into 2023.
If all goes according to plan, the bill is expected to boost construction spending by 7% annually for the first five years. Overall, it seems like a positive for the economy, but it will also tighten the labor market for other types of businesses, especially CDL drivers. It will also push raw material prices higher.
Listen to the Webinar
Although we captured many of Dr. Kuehl’s key points about the economy here, there’s still lots of good information left to explore in our recent webinar. To listen to the archived version, and uncover more of Dr. Kuehl’s predictions, visit this link.