Article source: ConstructConnect
The dreaded and ballyhooed recession remains at bay for the moment. In fact, much of the recent news concerning the economy has been great. GDP growth at the end of last year was remarkably strong. Jobs creation is still super-charged. Unemployment rates are holding fast at minimal levels. Retail sales have been booming. ConstructConnect’s own ‘starts’ statistics, supported by ‘mega projects’, began 2023 with a bang. And inflation is continuing to abate.
That last point is especially important. Current recessionary fears stem mainly from the financial side of business and personal affairs. Climbing interest rates make it harder to pay for loans and inhibit all manner of borrowing. Pricier mortgage rates tamp down new and resale home buying. Plus, banks inevitably become more careful with their lending. Capital spending on medium and smaller-sized construction projects is often a casualty.
The fact that interest rates are up, although not nearly as dramatically as one might suppose ̶ i.e., see Graphs 7 and 8 for historical context ̶ rests squarely with inflation. The Federal Reserve and the Bank of Canada and other central banks around the globe have been lifting rates to try to rein in prices (which is also to say, costs).
