May 2024 Economic Forecast: Predictions That Will Shape the Year Ahead

CHINA HOUSING CRISIS
In mid-May, Beijing authorities announced that the government would acquire $42B of unsold residential real estate from property developers and convert it into affordable housing. This move comes in the wake of over two years of massive defaults by developers such as Evergrande, leading to consumer mistrust and slowing overall growth in the nation’s economy. As 70% of Chinese wealth is tied to residential real estate, the government’s recent announcement of a rescue was crucial to prevent a drawn-out economic crisis, and has sparked optimism in both consumers and Chinese financial markets.

GLOBAL GROWTH
The UN recently forecast a 2.7% rise in global growth for 2024, a cautiously optimistic number, as pundits deem anything exceeding 2% as satisfactory for global living standards. European central banks are expected to follow Switzerland’s mid-May lead in rate reductions, strengthening European exports which will, in turn, aid in U.S. inflation control during the second half of the year.

INFLATION & FED ACTIVITY
Inflation rose to 3.4% in mid-May, a 0.3% month-over-month increase. While Dr. Rossell still views a September rate cut as a real possibility, ongoing strong consumer spending and a robust job market are sustaining current inflation rates, meaning the Feds will likely stay in “wait-and-see” mode through the summer months.

MORTGAGE & INVENTORY
Nationally, the mortgage rate for a 30-year fixed product has hovered stubbornly around 7%, maintaining the “lock-in effect” for those homeowners who secured historically low rates during the pandemic era. Nonetheless, with new construction up 5.6% in April month-over-month, a strong jobs market, and a September Fed rate cut still on the table, economists anticipate an uptick in housing market activity toward the tail-end of the year.

FINANCIAL MARKETS OUTLOOK
In mid-May the Dow closed above 40,000, setting a new record. Financial markets are inherently unpredictable, and Dr. Rossell cautions that much of the current hot market activity is being spurred by early excitement in the realm of new AI-driven technologies. Nonetheless, barring any significant unforeseen shocks, we can anticipate ongoing healthy earnings success carrying forward through Q3.

Interested in more information about May’s insights? Check-out the full length interview!