economic update TRUS JOIST ® NORTHWEST BUILDER RESOURCE CENTER TRUS JOIST ® NORTHWEST BUILDER RESOURCE CENTER

You want to do it right, and we want to help you. Get information for the Northwest Region including technical literature, products, and contact details for your local territory managers.

You want to do it right, and we want to help you. Get information for the Northwest Region including technical literature, products, and contact details for your local territory managers.

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Quarterly Economic Review and Outlook

(continued from previous page) surveys, citing concerns about the direction of the economy, jobs, and inflation, have been more pessimistic, but future spending appears to be lining up with today’s low consumer expectations. In the closely watched University of Michigan consumer sentiment index, participants’ outlook edged up slightly in the last month (59.7), but the index remains mired near its historic low (50).

Bottom line: Consumer attitudes are unlikely to improve markedly so long as inflation rates remain elevated, borrowing costs keep rising, stock market values continue to decline, and labor markets are expected to become weaker.

Federal Reserve (FED) Policy

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Deliberations by the FED have led to hikes of 25 basis points (bp) up to 75 bp, with the latest decision in December to lift rates another 50 bp. The FED has raised rates 75 bp each time in its prior four meetings. The year began with the Fed funds rate between 0 - 0.25% and after the latest round of rate hikes is between 4.25 – 4.50%. Recently, the yield curve, which is the relationship between borrowing costs (i.e., interest rate) and the time to maturity for treasury securities, has inverted, meaning the interest rate on short-term treasury bills is higher than the interest rate on long-term treasury bonds. This became the case when the bond market began pricing greater economic volatility and higher inflation into the valuation of shorter-term securities. An inverted yield curve is often a harbinger for an economic contraction.

Bottom line: The FED has been clear that it wants to see lower inflation. Therefore, interest rates will likely be lifted again until demand softens, growth slows, labor markets weaken, and inflation is down to 2%.

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