A
Th e
Component Manufacturing dverti$ dverti $ er
Don’t Forget! You Saw it in the
July 2022 #14276 Page #96
Adverti$$er
5 Tips for Surviving Stagflation
W
Craig Webb President, Webb Analytics
hen one of housing’s biggest optimists changes his outlook, attention must be paid. Stephen Kim, senior managing director and head of Evercore ISI’s Housing Research Team, had declared in September 2020 that housing had entered a Golden Age. But that changed on June 20.
“The impact to affordability [from mortgage rate hikes] on top of a rapidly deteriorating consumer outlook makes it increasingly likely that a cycle of fear will churn its way through the housing complex over the next six months,” Kim wrote in a new report. His updated forecast calls for an 11% decline in housing starts this year from 2021 and a 12% drop in existing home sales, followed by drops in both categories of another 1% in 2023 and finally a return to growth in 2024. With his reset, Kim joins the herd of economists and housing experts who say the COVID era’s pellmell growth is slowing. The return of 6% mortgages has made houses much less affordable: sales of existing Darker times are coming—plan your course correction now. homes fell 3.4% to a seasonally adjusted annual rate of Photo of sunset on Chesapeake Bay, MD by Andy Squint. 5.41 million in May and are 8.6% lower than a year ago. There are a record number of homes under construction—largely because of supply-chain hangups—but housing starts fell in May to a 13-month low, while the annual rate of building permit issuances dropped 5.5% from April. Those numbers don’t reflect the impact of the Federal Reserve’s increase in its key lending rate of 0.75 percentage point on June 15—the biggest single rate hike since 1994. That’s likely to increase rates on credit cards and business loans and have an impact on mortgage rates. And over this all looms the threat of stagflation—a period in which the economy limps along while prices keep rising. The last time this happened, according to The Wall Street Journal, stock price indexes went nowhere for 16 years while inflation ate away at profits. It took a recession induced by Fed Chairman Paul Volcker to snap the nation out of its lethargy and onto a decades-long path of growth. How do you manage amid stagflation? Nobody has a magic formula, but experts tend to recommend doing these things: 1. Focus Extra-Hard on Profit Margins “No margin, no mission” is a saying that applies to business any time, but it’s particularly important now given what we’ve been through since early 2020. When prices rise to scary heights and customers still are clamoring Continued next page
PHONE: 800-289-5627
Read/Subscribe online at www.componentadvertiser.com
FAX: 800-524-4982