Trends and Forecasts

Every year, the Exploding Topics website issues a report on what its various surveys of economists say are the key economic trends for the next couple of years.    In the latest report, it warns about the risk of stagflation (where inflation is high at the same time that the economy moves into a recession), but didn’t actually predict that this would happen.  Real estate sales may drop, due to persistently high prices and high mortgage rates.  Europe could experience an energy crisis this winter, and accelerating climate change may start becoming not just visible but damaging to global economies.

The two trends that are likely to have an immediate impact on the economy and the investment markets have to do with consumer spending and (a related trend) the ability of companies to sell their goods and services.  One of the charts, reproduced here, tracks the buying conditions for durable goods from the University of Michigan’s monthly Survey of Consumers.  It found a rapidly plummeting situation, where high interest rates and rising prices (up 14% in aggregate over the past year) are causing fewer consumers to finance expensive purchases. 

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If there is indeed a slowdown among consumers, that would cause manufacturers and retail outlets to experience what economists refer to as a ‘glut of inventory’—that you and I would call a lot of unsold stuff sitting on the shelves or in warehouses.   Many of these companies expected that consumer demand would roar back after the pandemic ended, but those aforementioned high prices and the fact that the pandemic lingered might produce a disappointing market experience that could lead to a short-term decline in sales and profits.

One should remember that these are predictions, and predictions are not the same thing as reality.  There’s a wonderful joke to the effect that the ‘science’ of economics exists in order to make the predictions of gypsy fortunetellers look reputable.  To know what’s going to happen, we’re going to have to experience it directly.

Source:

‍https://explodingtopics.com/blog/economic-trends