Date: 1 November 2023
The overall U.S. economy will most likely enter recession in the coming months, with nonresidential construction beginning to feel the effects in late 2024, says Connor Lokar, senior forecaster, ITR Economics, who returned to the Glazing Executives Forum at GlassBuild America to deliver the event’s popular annual economic forecast keynote presentation.
“We anticipate a recession in 2024,” says Lokar, who, for the first time brought his full-length forecast to the GlassBuild show floor, in a standing-room-only session at the GlassBuild Main Stage. The session was presented as the 3rd quarter gift from the National Glass Association as part of its year-long 75th anniversary celebration.
Lokar anticipates the recession will be mild but will demand that companies plan for a downturn to ensure their companies are protected and to even find opportunity during the slower business cycle. “This is not going to be as bad as 2008 or 2009. The businesses that will get into trouble are those that don’t plan for it,” he says.
Single-family has been in recession
The single family market is the “canary in the coal mine” for the overall economy and has been in recession since late 2022, Lokar says. “Now it’s rounding into recovery,” he says.
However, the sector continues to face some notable headwinds, including affordability issues and high interest rates. “The market needs lower interest rates for people to consider selling their homes that they refinanced when rates were low,” he says.
Multifamily is heading for a tough year
Companies that have leaned into multifamily contracts during the sector’s boom of the last several years should prepare for slowdown in the near term, Lokar says. “If you’ve been living off multifamily, [the sector] is entering recession,” he says. “Starts were down 28.1% in the last quarter, and permit pulls have cratered.”
Nonresidential is strong, but will slow in late 2024
While single-family construction leads the economic business cycle, nonresidential construction lags. As a result, the market has been strong throughout 2023 and will likely stay strong through much of 2024.
“For companies on the nonresidential side, it has been great. … And next year should be great, or at least good. But be careful for what comes next,” Lokar says. “You’ll be in recession by end of 2024.”
The silver lining amid slowdown: improvements in labor, supply and inflation
An economic slowdown will provide some relief for companies when it comes to the three top pain points of the pandemic and post-pandemic era: supply chain problems, inflation and labor shortages.
“This deceleration and ultimate recession is going to take pressure off all of those,” says Lokar. “Your workforce issues won’t be fixed, but they will be easier to manage. Inflation is not fixed, but it’s coming down. And the supply chain has gotten better.”
Invest in your business during a slowdown
Lokar adds that a slowdown will give the construction industry its first “breather” since prior to the pandemic. “You’ll have an opportunity to get the house in order. You’ve spent 3 to 3.5 years surviving the pandemic, with unprecedented supply chain issues, inflation pressures and turnover. You’re going to be able to breathe.”
For businesses that plan ahead, slowdowns can be opportunities for investment and preparation for future growth, Lokar says. “Think about everything you’ve said no to over the past two or three years. That’s what you can bring back to the front burner. Take on the big things, like an internal software transition, training or investing in your business.”