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Inflation is cooling and interest rates are expected to start falling in the second half of the year, but other issues remain, said Anirban Basu, chief economist at Associated Builders and Contractors, in a July 10 mid-year economic update webinar presentation.
“A lot of people thought the recession was inevitable last year. It didn’t happen,” Basu said.[But] I still think there is a chance of a very mild recession in 2025.” Basu points to rising consumer debt and the uncertainty of the upcoming election as among the challenges facing the economy today.
Total nonresidential construction spending rose 37%, not adjusted for inflation, between the start of the COVID-19 pandemic in February 2020 and May 2024, according to the Census Bureau of the USA. “This is still the era of the megaproject,” Basu said, in response to the impressive 198.1% increase in the manufacturing sector. The hotel sector remains at the bottom of the list, with a drop of 30.5%.
Nearly half of the webinar participants reported in a survey that labor shortages are the most pressing issue facing their companies right now. In a subsequent survey, 29% said they expected their companies’ profit margins to be slightly lower a year from now.
Basu predicts that interest rates will begin to fall in September, with an additional rate cut by the Federal Reserve in December. Even so, he notes, the cuts will not have an immediate effect on the economy “due to contracts signed or ongoing work executed” and there will be a delay before the positive effects are felt.
While many economists have given up on the idea of a near-term recession, Basu continues to expect one. “It’s coming almost a year later than I originally planned, but the recession is coming.”
