A Tale of 2 Cities

In his classic novel “A Tale of Two Cities,” Charles Dickens’ opening line is a perfect metaphor for the current state of the U.S. economy: “It was the best of times, it was the worst of times.” Your view of the nation’s current economic situation depends on where you are financially. Several contradictory forces are acting on the U.S. economy as it moves at a slowing pace before rebounding to trend growth (+2.0 percent) at the start of 2026. Among the contradictory forces holding the economy back are inflation, a weakening U.S. dollar,  and immigration.

Strengths of the U.S. Economy Include:

  • Overall inflation growth is slowing (+3.1 percent year over year in November 2023), though it still remains slightly above the historical average of two percent. By 2025, overall inflation should fall to 2.4 percent per annum and remain falling to 2 percent by 2028.
  • Housing starts remain above 1.35 million units annually and will continue to aid economic growth through 2028. Starts increasingly favor single-family units, which average 50 percent greater floor area over multi-family units.
  • Residential home improvements will grow slowly through the first half of 2024 and then accelerate in the second half of 2024, growing faster throughout the forecast period.
  • Real personal disposable income will grow at an inflation-adjusted annual rate of 2 percent or greater through 2028.
  • Residential mortgage rates, though moderately high at 6 percent currently, will fall slowly through the forecast period.
  • Consumer spending remains the engine of the U.S. economy (accounting for about two-thirds of the gross domestic product) and should grow at an inflation-adjusted rate of 2 percent or more through 2028.
  • Non-residential building construction will grow throughout the forecast period, especially for education, transport, and institutional building types, less so for health care. Conversely, office, religious, amusement and recreation, and retail building construction will decline slightly.
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Factors Threatening the U.S. Economy Include:

  • High energy and food prices are sapping consumer spending power and reordering their priorities. In Q4/2023 alone, consumers added $40 billion in total consumer credit and the personal savings rate fell to the lowest rate in 15 years, 3.7 percent of disposable personal income.
  • Deficit spending to finance tuition forgiveness, Ukraine and Middle East wars, and humanitarian aid will weaken the U.S. dollar.
  • Federal debt will exceed $34 trillion for the U.S. by the end of 2024, and the interest on this debt ($800 billion per annum) will be nearly equal to the U.S. annual defense spending budget for the same year ($849 billion).
  • Slowing employment growth will stymie economic growth. In 2023, 25 percent of hiring was by the government and 39 percent by quasi-government education and healthcare sectors, leaving 36 percent of new jobs being created in the private sector.
  • Other potential threats to the U.S. economy include a widening war in the Ukraine or Middle East, new conflicts in Taiwan, the Persian Gulf, or other areas, a major domestic civil disturbance, another global pandemic, or a major trade war threatening prices and logistical trains.
  • An index of leading U.S. economic indicators are predicting a downturn.

This is a summary of the March 2024 Quarterly Market Monitor Report published by Market Insights LLC. NWFA members have exclusive access to the full report, which provides forecasts and analysis of economic, market, and industry conditions and trends affecting the North American flooring market. The report includes a historical and forecasted volume of dollar sales of total wood flooring (at mill sell price) per metro area and state. Separate reports are available for the United States and for Canada. The availability of the reports on a quarterly basis will provide NWFA members with current data that can help them develop business plans, prioritize inventory, and react to market conditions in a timely manner. NWFA members may download the full report by visiting nwfa.org.

Santo Torcivia is president of Market Insights LLC in Reading, Pennsylvania. He can be reached at 610.927.2299 or storcivia@marketinsightsllc.com.

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