Top 10 takeaways from our 2024 Economic Outlook with Bryan Yu
On the 17th of Jan, Yield Exchange CEO Yvette sat down with Bryan Yu, Chief Economist at Central 1, to explore some of the economic trends we should expect in the coming year! Below, we've outlined the top 10 things we're taking away from the webinar, but here's a short clip to give you a taste of how things went.
For more in depth insights into everything from economic forecasts to perspectives on AI and Climate Change, click here to watch the full webinar!
Without further ado, lets jump into our top 10 takeaways!
1. Economic Resilience and the Soft Landing
"When we look at the early parts of 2023, there was a lot of talk about when that recession was going to hit. What's been surprising is there's been a lot of resilience and right now, the discussion is more around the soft landing."
While Bryan thinks that we're still going to see some slowdown in the coming year, he expressed some optimism that we may have staved of the worst of last years recessionary fears.
2. Interest rates likely to come off
3. Lagging impact of high rates yet to come
"This year, the theme is somewhat of a stagnant economy, we have growth sitting roughly around 0.7%. Will we be wrong? Maybe, but it's a similar pattern of slowdown here, and much of it is about that lagged impact of monetary policy. Yes, rates will come off, but renewal rates for mortgages are substantially higher now and we're still sitting in that over 5% range...so those people are going to hurt as we go forward."
While rates are coming down, the impacts of our high-rate environment are not gone yet. Economics can be a slow road to walk, and we'll definitely still be facing the lasting impact of some of last years challenges before things full turn around.
4. Slowdown to hit hardest in consumer spending
"We're clearly going to see this consumer-led slowdown due to the overhang of mortgage debt in the economy. So in terms of areas that are probably going to struggle a bit more it’s retail spending, transportation and warehousing, those areas that fit into how you transport goods for the purpose of consumption."
Bryan talked about how while he doesn't think that we're going to see a huge drop in market or big defaults happening, there will definitely be some reallocation happening. Consumers will be making much more measured choices about exactly where their income is going, and being critical about unnecessary expenses.
5. Companies still hesitant to lay off employees
"The issue is that businesses are also telling us that they're not looking to really lay off workers either. We've just gone through a pandemic where they couldn't find workers, so businesses are very hesitant to lay them off because it's going to be more difficult to re-onboard individuals going forward."
Cutting staff is no longer looking like the easy way to reduce expenses that it used to be. With the labor market still looking strong, companies are expressing more reluctance to let go of staff in case things start to go well and they have to face the same hiring challenges it took to get them.
6. Technology is changing the game
"I think we're learning here around technology, that you kind of need to invest resources in terms of productivity-enhancing growth. What does that mean? Continuing to invest in their operations to lower those costs per worker or allowing for higher growth per worker...You want to find the technologies that are going to help...the partners we can use to potentially make one individual do one and a half people's jobs."
New technologies such as AI are taking the world by storm, and while Bryan doesn't think that they will be replacing too many workers just yet, they will definitely provide significant value to those companies who are able to use them complementary tools.
7. Businesses need a plan for climate change
"It's the risk impact, climate change impacts your operations. If you're in a floodplain, maybe it didn't matter a couple of years ago, but or a decade ago as much, But if this is an ongoing impact, that's clearly gonna be a factor... Those factors around climate change are going to impact not only businesses, but also cities and infrastructure or municipalities"
Climate change risk needs to be a key consideration for businesses to think about when thinking about things like insurance. Especially for those looking to gain investment, investors now will be looking for some kind of climate mitigation strategy in many of their profiles.
8. How can we plan around economic insights?
"I think it should be the front-end stage of your environmental scan... we can project different scenarios, like the probability of having an interest rate of 5% at the end of this year versus 3% and use that to manage risk. You're not going to build your business around risks because risks are occurring all the time, but the question is whether they're large enough to derail your business, and do you have a plan."
For Bryan, economic insights are a useful tool for business to keep in their high-level strategic plans and then use the data they see throughout the year to validate their hypotheses. It's also a great place to find data to inform your strategies. If wages are going up 5% on average, how are you going to look to stay competitive in that market?
9. Most important questions businesses need to ask for a successful 2024
- What is my core business?
- How do you maximize your productivity if I can't change my expenses?
- If you have the ability to invest, what can you do to future-proof
These are some of the key questions that Bryan wants business to ask themselves this year. For him, it’s going to be important for businesses to focus on their key operations and make sure that they aren’t taking unnecessary risks or expenditures. We may not see a recession this year, but it will be important to ensure we stay steady for what might be a slow period for business.
10. How can businesses actively participate in shaping economic policies that might affect them
"I love this because I think businesses should play a role in terms of policy... We can think about how many small businesses there are. For individual companies and organizations, you can join associations because one of the things we always find is that there is power in numbers."Shaping policy is an important role that business can play in the economy, and Bryan highly encourages businesses to take a look into some of the professional organizations that exist to represent them. Smaller companies may not have as much of a footprint as big organizations, but volunteering your time can often bring you into the various polls or advocacy groups that are out there that can help make positive change.