in a recession (yet), which is technically defined by two quarters of negative GDP (gross domestic product) growth. But the stock market is in or near bear market territory, with prices down around -20% from recent highs, and inflation is higher than we have seen in years. But a 3.6% national unemployment level is tolerable; jobs are still plentiful in most business sectors; the commercial construction market is still showing some signs of growth; and the employment numbers for electrical contractors and factory workers continue to increase.
While trying to make sense of these conflicting cross currents of data, I decided to check out what several reputable economists and business associations had to say about the current economic environment. Below is a summary of their thinking.
AIA’s Consensus Construction Forecast
Kermit Baker, chief economist, American Institute of Architects (AIA), says in his analysis of this forecast, which combines the prognostications of eight leading construction economists, that construction spending on buildings is projected to increase just over +9% this year and another +6% in 2023, despite a “significant deterioration” in the outlook for the broader economy.
Said Baker in his analysis of market conditions, “A growing set of economic indicators have turned negative, and many economists feel that the prospects of an economy-wide recession have increased.”
He added that the most worrisome indicators are the decline in the stock market to bear market territory, inflation, rising interest rates, declining consumer and business sentiment and plummeting housing starts.
The Conference Board’s U.S. Leading Economic Index (LEI)
The LEI decreased by -0.8% in June 2022 to 117.1 (2016=100), after declining by -0.6% in May. The LEI was down by -1.8% over the first half of 2022, a reversal from its +3.3% growth over the second half of 2021.
Ataman Ozyildirim, the Conference Board’s senior director of economic research, said in the June LEI press release, “Consumer pessimism about future business conditions, moderating labor market conditions, falling stock prices and weaker manufacturing new orders drove the LEI’s decline in June.
“Amid high inflation and rapidly tightening monetary policy, the Conference Board expects economic growth will continue to cool throughout 2022. A U.S. recession around the end of this year and early next is now likely.”
Electroindustry Business Confidence Index (EBCI)
Published monthly by Don Leavens, VP and chief economist, and his team at the National Electrical Manufacturers Association (NEMA), the EBCI is a survey of senior executives at electrical manufacturers on current and future business conditions in the electrical market. They don’t like what they see for the future, according to the June survey, and their read on future conditions reached its lowest point since the depths of the Great Recession.
According to the June EBCI, “Three-quarters of survey respondents anticipate ‘worse’ conditions in six months. Although some positive embers remain, most of the comments suggest the myriad of external shocks, such as inflation and the bitter medicine the Fed will use to fight it; dogged supply chain problems; domestic and international conflict; and cooling economies around the world, will create headwinds for electrical manufacturers.”