Ryan Severino, an expert economist and head of U.S. research at BGO, predicted a modest economic downturn for 2024 with slower job gains and potential interest rate cuts by the Federal Reserve. However, as we approach the end of the first half of 2024, it seems that these predictions have not yet come to fruition.
According to several experts in the field including Ray Perryman from Perryman Group and Omar Eltorai from Altus Group, overall economic performance has aligned with expectations but there have been some surprises such as continued inflation and unexpected investor appetite for public securities.
On a positive note, job growth has exceeded expectations with over 1.2 million jobs added in just five months. This has helped support occupancy rates in commercial real estate despite sluggish rent growth.
While there was anticipation for increased transactions on the real estate side this year, Eric L. Enloe from Partner Valuation Advisors notes that this rebound hasn’t happened yet but there are some positive trends emerging in industrial and multifamily sectors.
One major surprise was that despite market consensus at the end of last year calling for interest rate cuts by mid-2024 ,the Federal Reserve has maintained its higher-for-longer policies thus far into 2024 which is contrary to what many expected would happen due to current economic conditions such as slowing GDP growth and reduced inflation rates.
Experts suggest that while a cut or multiple cuts could still occur later this year or early next year they may not be immediate according Ryan Severino who believes any action will likely take place towards late fall or winter months rather than earlier on during summer meetings due political considerations around election time which falls close after one meeting date later this November .
Jonathan O’Kane also weighs-in saying markets currently predict three out-of-five chance EFFR reductions before September’s FOMC meeting followed by greater than nine-out-of-ten odds before December’s final gathering; however if Q2 GDP growth is robust as Atlanta Fed predicts at 2.7%, then chances are good that any action will be delayed until later in the year.
Stephen Buschbom from Trepp also suggests that if inflation remains low and job additions cool down, the Fed may gradually ease its current stance over next few months while Eric Enloe adds that it’s not just EFFR to watch but also keeping an eye on 10-year Treasury yields which have dropped by half a percentage point since April despite no changes in interest rates by Federal Reserve so far this year.
In summary, experts agree there has been some deviation from initial predictions for first six months of 2024 with overall economic performance aligning with expectations but some surprises such as continued inflation and unexpected investor appetite for public securities. While job growth has exceeded expectations thus far into first half of this year, real estate transactions haven’t rebounded yet although positive trends are emerging particularly within industrial and multifamily sectors. The biggest surprise was Federal Reserve maintaining higher-for-longer policies rather than cutting interest rates due to slowing GDP growth and reduced inflation rates; however experts suggest potential cuts could still occur later this year or early next depending on how economy performs over coming months leading up towards end-of-year meetings where political considerations around election time may play a role in decision-making process regarding whether or not any rate reductions take place before January rolls around again .
