Source: ITR Economics – August 2024
Understanding the economic factors influencing your business’s trajectory is key in this cycle. Learn about the strengths and weaknesses of the US economy.
As we move through the second half of 2024, many businesses are feeling the strain of a slowing economy. Some sectors are contracting; other segments are growing. With the economy currently slowing down, these are some of the key strengths and weaknesses of the current US economy.
Overview of Recent GDP Data
The latest US Real GDP figures show growth, as second-quarter GDP came in 3.1% above the year-ago level. While the media has highlighted this as a strong performance, a closer look reveals that the growth is not quite as robust as it might seem. Specifically, spending in non-discretionary categories aided the growth figure, as did rising inventories.
Despite overall GDP growth, certain sectors – particularly those that are discretionary or interest-rate sensitive – are showing underlying weaknesses that are pressuring businesses. Recent volatility in the stock market has added to concerns. Rise in our system of leading indicators, however, signals that the economic softness we are going through will be temporary, and businesses that move closely with the overall economy should prepare for economic growth in 2025–26.
The Negative – Challenges in the Industrial Sector
The industrial sector is struggling compared to the service sector, with US Industrial Production trending relatively flat. This weakness is expected to persist through the end of 2024. While manufacturers and distributors may continue to face difficulties, there is a light at the end of the tunnel.
It is easy to be discouraged by current challenges, but we anticipate growth in the industrial sector for 2025 and 2026. Now is the time to strategize for future opportunities, particularly with lower interest rates coming.