b'22 ECONOMIC OUTLOOKMacroeconomic OutlookIndustry Snapshots In December, we revised our US macroeconomic outlook due to the sustained yield curve inversion. We are now anticipating a recession Arrow denotes 12-month moving total/average direction. for 2024; we had originally expected that the downturn would occur later in the decade. Here is what this means for the different segments of the US economy: RETAIL SALES Retail Sales: We are likely to see softer consumer spending ahead, given elevated and still rising interest rates, stock market volatility, and declining inflation-adjusted savings. However, the labor market still favors consumers, inflationary pressures are easing, and credit WHOLESALE TRADE delinquencies remain low. Altogether, these factors will result in relatively mild rise in annual US Total Retail Sales spending this year and relatively mild decline in 2024.AUTO PRODUCTION Industrial Production: The US industrial sector will decline in 2024 as demand from consumers and businesses slows and high interest rates curtail some investments. However, decline will be relatively MANUFACTURING mild due to nearshoring trends. After the sourcing challenges and delays of 202022, US companies are looking to keep more of their supply chains closer to North American consumers, which will benefit the US manufacturing sector. ROTARY RIGResidential Construction: Given affordability constraints and macroeconomic concerns, annual US Single-Unit Housing Starts are declining. This trend will extend into late 2023, troughing CAPITAL GOODS below 2020 levels. To date, Multi-Unit Housing Starts have fared better than Single-Unit Starts, as many would-be homebuyers have Dedicated to keeping its members at the forefront in their industryinstead opted to continue renting. However, Multi-Unit Starts are weakening; a mild declining trend will extend from the first half NONRESIDENTIAL CONSTRUCTION of this year into early 2024. Given low vacancy rates and housing inventories, we do not anticipate a Great Recession-like scenario this cycle. Rise across the residential construction market will RESIDENTIAL CONSTRUCTION characterize the rest of 2024.Nonresidential Construction: Nonresidential construction lags the US macroeconomy by about a year, as funding, planning, and starting such projects is a lengthy process. We expect to see some decline in the nonresidential sector materialize in 2024 as early SteepMild Rise Flat MildSteepimpacts of high interest rates manifest. Weakness will likely extend Rise Decline Decline past 2024, given this sectors lag time to the macroeconomy.In December, we revised our US macroeconomic outlook due to the sustained yield curve inversion.For your business purposes, keep in mind that the above overviews apply to very large sectors, and trends within your specific vertical markets will vary in sensitivity to the economic downturn. Furthermore, there are still risks to the above outlooks. These forecasts are predicated on the assumption that the yield curve inversion will not last past 2023. If it does persist further, it would indicate the likelihood of a deeper and longer-lasting recession than forecasted.ITReconomics.com 2023 All Rights Reserved 1The InsulatorFebruary 2023'