Opinions on the economy seem to be like the weather report – somewhat correct and somewhat missing the mark. What is true is that bankruptcies are up and there is more risk in the economy than we have seen in the past several years.
CRF was fortunate to have Ryo Tashiro, Outreach Economist from the Philadelphia Federal Reserve, speak in our 2024 webinar series and provide clarity across the economic landscape. This valuable session not only included data points from Ryo but also included polling of the credit professionals that attended as to their sentiment for the industries and customer portfolios that they support.
My take-aways from the session are one of caution and the need for companies to maintain diligent credit policies given a number of conditions relating to the general economy, labor markets, inflation and monetary policy implications. Here are several highlights as presented by Ryo:
- FRB, 3rd District Business Outlook – Both manufacturing and non-manufacturing business sectors are less optimistic about the future.
- Personal Savings Rates – After a period of an increasing trend, the rate has begun to drop again. This may signal more challenging times as households are having more difficulty financing their consumption.
- Delinquency Rates – Both credit card and auto loans over 60 days past due have both picked up and are at the highest levels in more than a decade.
- Inventory / Order Backlog – Inventory levels are up, and order backlogs are at pre-pandemic levels.
- Labor market – Labor markets remain robust at a national level with 48% of webinar participants indicating their organizations have reduced headcount.
- Work From Home – While this is impacted by industry and type of position, overall 10% of full-time employees are now fully remote with several industries in the mid 20% range. This impacts commercial office space and is a metric to be carefully monitored as net absorption has turned negative.
- Inflation – The inflation rate has eased but remains higher than target levels.
- Wages – While the current rate of increase for average hourly earnings (seasonally adjusted) is at 4.1%, participants on the call indicated they are not seeing a change in compensation.
- Interest Rates – As a result of U.S. monetary policy, interest rates have risen in the past year and as a result, borrowing has been dampened.
The above reference points, as noted from Ryo’s presentation, suggest a slowing in the growth of the economy, and cautionary concern in several areas as we continue to work through this period in history.
A recording of the presentation is available free of charge to CRF members in the “Knowledge Store” section of our website. Non-members may purchase a copy of the recording.