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Florists' Review - January 2024

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BUSINESS 54 B January | 2024 Product] to grow 1.4 percent in 2024," says Bernard Yaros Jr., assistant director and economist at Moody's Analytics. (GDP is the total value of the nation's goods and services.) at's slower than the 2.1 percent increase expected when 2023 numbers are finalized, and it's below the 2.0 percent to 3.0 percent considered emblematic of normal business growth. GDP is the most commonly accepted measurement of economic growth, and "Real" GDP adjusts for inflation. Slowing commercial activity will affect bottom lines. Moody's Analytics expects a decline of 4.5 percent in corporate profits for 2023 and only a modest recovery of 0.3 percent in 2024. Reports from the field confirm these economists' readings. "Our members are experiencing a business slowdown, due largely to increasing interest rates," says Tom Palisin, executive director of e Manufacturers' Association, a York, Pa.,-based regional employers' group with more than 370 member companies. While businesses understand the need for higher interest rates, they nevertheless hope for early relief. "If inflation does not continue to drop, interest rates will have to be increased further, which will be a big problem," says Palisin. So, are the Federal Reserve's efforts to reduce inflation by raising interest rates paying off ? ere's some good news here, as well as a sunny forecast. Moody's Analytics expects year-over-year consumer- price inflation to average 3.2 percent when 2023 numbers are finalized, down from more than 6 percent in 2022. Moreover, the number should continue to drop until it reaches the Fed's target rate of 2 percent late in 2024. (ese figures represent the Personal Consumption Expenditures [PCE] Price Index—a measure of how consumers spend their money and whether they save rather than spend. It strips out food and energy prices and is the Federal Reserve's preferred measure of inflation.) Indeed, Moody's Analytics believes the Fed will start to lower interest rates around June 2024—although more slowly than previously anticipated because of persistent inflation and ongoing labor market tightness. Cuts of about 25 basis points per quarter are expected over the next few years until the Federal Funds Rate—the interest rate that banks and other depository institutions charge each other for overnight loans—reaches 2.75 percent by the fourth quarter of 2026 and 2.5 percent in 2027. For retailers, declining inflation is a two-edged sword. On the positive side, it encourages shoppers to spend more. On the negative side, it gives retailers less power to raise prices. And once inflation is taken into consideration, "This year, we will face uncertainty about inflation and interest rates, labor shortages, rising energy costs, a slowdown in China's economy and recurring threats of a federal government shutdown. There are a lot of spinning plates in the air, and some of them may fall and crack." — Tom Palisin, executive director of The Manufacturers' Association

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