Global Fastener News

Beaulieu: Fed Rate Hikes Could Cause Recession

Beaulieu: Fed Rate Hikes Could Cause Recession
November 07
11:27 2022

If the Federal Reserve continues raising interest rates, it could launch a recession either late 2023 or 2024 and bring back inflation, economist Alan Beaulieu told the Specialty Tools & Fasteners Distributors Association.

Beaulieu, president of ITR Economics, in November 2022 gave a different outlook on the possibility of a recession than ITR’s Lauren Seidel-Baker told the National Fastener Distributor’s Association earlier in 2022.  “We at ITR Economics don’t see a recession coming,” Seidel-Baker said in June. There may be a “soft landing,” but not a recession.

Beaulieu told STAFDA that North American industrial production is strong and would remain so in the coming years, and the U.S. will remain the world’s leading economic power for decades.

But Beaulieu added that serious, worldwide economic turmoil continued to loom through the 2020’s. For more than a decade ITR has been predicting another “Great Depression” late in this decade.

Once forecast more for the 2030 decade, Beaulieu now predicts an economic decline is more likely to happen sooner than later.

There are several factors leading to a depression, including a worldwide aging population driving up healthcare costs. Rising interest rates will increase costs as central governments continue spending patterns.

ITR projections foresee industrial production peaking in 2029 and then slipping, Beaulieu said. Production would drop to levels after the last major economic crisis in 2008. He advised executives to plan on how to grow their businesses in a shrinking economy. That includes marketing plans and establishing competitive advantages. Generic statements about the quality of its team isn’t a competitive advantage.

Beaulieu said cash and access to cash would be important, Beaulieu said.  

Differentiating your company is particularly important when the only growth is at the expense of rivals going under, Beaulieu said.  A company’s competitive advantages also are a boost during the current inflationary period.

  • “We have begun disinflation,” Beaulieu declared. Prices appear to be easing. That, combined with reduced orders, is helping to alleviate pressures on supply chains.

The trend might not last if the Federal Reserve continues its pattern of raising interest rates, which could lead to a recession either in late 2023 or 2024 — and bring inflation back with it, Beaulieu cautioned.

  • “Three percent interest rates aren’t coming back in this decade,” he predicted.
  • The U.S. population isn’t “aging out” as quickly as other major global economies, labor issues will persist due to both demographic and immigration trends, Beaulieu said. The population isn’t growing enough for the jobs the economy is creating, he explained.
  • Wages will continue up, Beaulieu predicted. He recommended looking for inefficiencies to cut to offset higher employee costs. Web: ITReconomics.com Web: STAFDA.org

Related Articles

0 Comments

No Comments Yet!

There are no comments at the moment, do you want to add one?

Write a comment

Only registered users can comment.

error: Content is protected !!