b'ECONOMIC UPDATE CSIA 13continuedfrom pg. 12The construction sector will feel similar downwardearlier. Moreover, the number should continue to pressure. A major issue for construction is thatdrop until it reaches the Feds target rate of 2% late inflation remains problematic and interest rates arein 2024. (These figures represent the core personal likely to stay higher for longer, said Anirban Basu,consumption expenditure deflator (PCED), which Chairman & CEO of Sage Policy Group (sagepolicy. strips out food and energy prices and is the Federal com). That impacts project financing. He notes thatReserves preferred measure of inflation).the economy is still experiencing inflation pressures from energy prices, wages, and consumer spending.Indeed, Moodys Analytics believes the Fed will start to lower interest rates around June of 2024, although Basu sees something of a mixed bag for the industry.more slowly than previously anticipated because Heretofore, construction companies in all sectorsof persistent inflation and ongoing labor market have been busy. But I think what youll see goingtightness. Cuts of about 25 basis points per quarter forward is that some contractors will get even busierare expected over the next few years until the Federal while others will see their revenues begin to fade.Funds Rate reaches 2.75% by the fourth quarter of 2026 and 2.5% in 2027.The future will be bright for those contractors aligned with mega projects in infrastructure and computerWill that de-escalation of interest rates be enough to chip manufacturing. The picture is less bright forkeep the natin from tipping into a recession? Moodys other contractors aligned to markets such as offices,Analytics believes that the nation will avoid a recession hotels and shopping malls. We know we have manyin 2024, attributing its forecast of a soft landing to millions of square feet of distressed office inventoryresilience in labor markets and consumer confidence.in this country that frustrates new construction, said Basu. Many owners of these office buildingsBasu, however, is among the economists taking a are taking enormous losses on the value of theircontrary view. I believe the US economy will be properties and are having to refinance their debtsin recession by at some point in 2024, he said. A at a time when interest rates are high and bankersnumber of factors, including a very strong consumer are reluctant to expose themselves to the vagariesand employers willing to hire more people and raise of commercial real estate. wages, have allowed the US economy to retain momentum. But major structural issues suggest the Battling inflation economy will weaken, including those higher interest Reports from the field confirm the economists readings.rates.Our members are experiencing a business slowdown, due largely to the effect of increasing interest rates, saidFeeling goodTom Palisin, Executive Director of The ManufacturersThe public mood is a strong driver of the economy. Association, a York, Pa.,-based regional employersAnd here the news is good. Consumer confidence group with more than 370 member companies (mascpa. has been trending higher, and I think prospects are org). While businesses understand the need for highergood for it to improve next year, said Scott Hoyt, interest rates, they nevertheless hope for early relief.Senior Director of Consumer Economics for Moodys If inflation does not continue to drop, interest ratesAnalytics (economy.com). Things should normalize will have to be increased further, which will be a bigas the economy continues to grow and gas prices problem, said Palisin.stabilize.So are the Federal Reserves efforts paying off?An impressive level of accumulated debt, though, is Theres some good news here, as well as a sunnyhanging like a dark cloud over the consumer landscape. forecast. Moodys Analytics expects year-over-yearWith credit card debt now above a trillion dollars consumer price inflation to average 3.2% when 2023with more consumers having to start paying back numbers are finally tallied, down from over 6% a yearstudent loans and with evidence of slowing labor continuedon pg. 14csiaonline.org'