We may not be in a recession, but the economy still faces several threats in the coming months, which together figure to act as a drag on growth. How much of a slowdown we get depends largely on how these looming issues play out. To help you understand what is going on with the U.S. economy and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…
First up — the autoworkers strike at the Detroit Big Three: General Motors, Ford and Stellantis. The UAW has struck three production
plants (one from each company) and 38 parts distribution centers for GM and Stellantis so far, and the two sides remain divided on a new wage deal, with the carmakers’ latest offer not enough for the United Auto Workers’ leader. But we know that consumers will suffer when factories go dark. Vehicle inventories were just recovering this year after COVID-era shortages.
The strike at all three firms will seriously crimp auto supplies if it continues. If that happens, look for new car prices to shoot up by 5% or so, and used-car prices to rise even faster, by about 10%. Owners may not be able to service their vehicles at dealers once parts shortages occur.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In the event that a strike lasts for 40 days — as happened at GM in 2019 when workers went out — GDP growth would suffer a bit, about 0.3%. A longer strike may actually cause a recession. If the two sides do reach a last-minute deal it’ll take some hefty pay increases for workers. The economy would dodge a bullet, but already-high car prices would rise even more.
Then, there’s the threat of a government shutdown starting October 1. Congress is nowhere near passing spending bills to fund federal agencies in the new fiscal year. Some House Republicans want sizable spending cuts and say they’ll force a shutdown if they don’t get them. Senate Democrats are saying “No way.” How this gets resolved isn’t clear as of now. Lawmakers might kick the can and OK a temporary funding bill. But that might merely defer an eventual shutdown and a resulting hit to GDP growth.
Following a possible shutdown is the resumption of student loan repayments, which is slated for October. Not every borrower is likely to start repaying, given the order the White House issued that nonpayment can’t be reported to credit rating bureaus. And some borrowers will use income-based plans that limit how much they must pay each month.
Still, the net result will be more people devoting some of their income to debt service after a long hiatus, which means less discretionary spending money. The most serious risk to growth is also a pretty good bet to come to pass: A pullback in consumer spending. Folks are using up pandemic-era savings that built up when the economy was partially shut down and there were fewer things to spend money on, such as travel and dining. Consumers aren’t tapped out just yet. But the average savings rate is down to 3.5%, from a pre-COVID range of 7%-9%.
Low-income borrowers are falling behind on debt payments. Higher-income households are likely to tighten up as their own savings dwindle. Retailers will have to cope with weaker demand.
All this points to a slower economy as 2024 gets underway.
Related Content
- Will the U.S. Dodge a Recession?: Kiplinger Economic Forecasts
- Kiplinger's Retail Outlook: Consumer Spending Likely to Ease
- All of Kiplinger's Economic Forecasts
-
How to Guard Against Identity Theft in 2025Scammers are getting better at impersonating legitimate businesses.
-
How to Leave Money to Descendants But Still Keep ControlYour choice of trustee(s) can dramatically influence how closely your wishes are carried out. These tips will help avoid bad blood among your heirs.
-
Don't Sleep on Japan's Economic TransformationThe Letter After almost three lost decades, Japan — one of the world's biggest economies — is finally showing signs of life.
-
Start-ups Trying to (Profitably) Solve the World’s Hardest ProblemsThe Letter More investors are interested in companies working on breakthrough science to tackle huge societal challenges. The field of deep tech has major tailwinds, too.
-
The Big Questions for AR’s FutureThe Letter As Meta shows off a flashy AR prototype, Microsoft quietly stops supporting its own AR headset. The two companies highlight the promise and peril of AR.
-
China's Economy Faces Darkening OutlookThe Letter What the slowdown in China means for U.S. businesses.
-
Should We Worry About the Slowing U.S. EconomyThe Letter With the labor market cooling off and financial markets turning jittery, just how healthy is the economy right now?
-
Kiplinger Special: How Businesses Should Budget for 2025Kiplinger Forecasts From fuel to AI software subscriptions, here's what you can expect to pay next year.
-
Intel Braces for an Even Tougher Road AheadThe Kiplinger Letter Amid a long, costly turnaround, Intel resets expectations again. Its new woes raise questions about U.S. industrial policy and global chip competition.
-
Kiplinger Special: The Long-Term Future of the U.S. Economy
The Kiplinger Letter Kiplinger's report into what it will take the U.S. to maintain a healthy economic growth rate.
