The last couple of articles I’ve written for the Micromobility Reporter have discussed the economic headwinds facing the industry, distributors and dealers in 2024. There have been some encouraging signs. Inflation has come down from highs not seen in decades, employment continues to grow though some cracks are beginning to show in that growth, especially at the lower end of the scale with new minimum wage laws coming into force, and the hope of an easing of interest rates.

Housing costs have risen significantly over the past couple of years.  A study done by Bankrate shows the number of states that require a six-figure salary to afford a median-priced home was six (plus the District of Columbia) in January 2020. In January 2024, that number is 22 (plus the District of Columbia). According to Redfin, a median-priced home was $290,000 in January 2020. In February 2024 that had risen to $412,000.

States that have seen the highest increase in needed annual salary to afford a median-priced home are Montana (77.7 percent), Utah (70.3 percent), Tennessee (70.1 percent), South Carolina (67.3 percent), and Arizona (65.3 percent).

An adjunct to this is mortgage rates. The average mortgage in early 2020 was available at 2.5 percent. In March 2024 that had increased to 7.1 percent. These rates are a result of the Federal Reserve setting the prime lending rates for banks around the country.

As noted in a previous article, interest rates have increased over the past 18 months as a tool to reduce inflation. That has worked. Inflation has retreated from its high and is moving closer to the Federal Reserve target. As a result, The Federal Reserve announced that reductions in the interest rate would be coming. Originally it was announced the first reduction would come in the first quarter of 2024.

Well, here it is starting the second quarter of 2024 and no rate cut has been announced. Inflation has yet to hit the two percent target. In fact, it has ticked up a little bit over the past couple of months. It was measured at 3.2 percent in February. That gives the Federal Reserve some concern. The chairman, Jerome Powell. said the Federal Reserve is “… patiently waiting for more positive inflation readings …” before reducing interest rates. “We don’t need to be in a hurry to cut,” Powell said recently.

The message is if you were hoping for a rate cut to help with your business plan this year, it may be late in coming and may not have the impact you were hoping for. The Fed is still forecasting three rate cuts this year. The question as to when seems to be pushing out and remains open.

The recent bridge collapse closing the Baltimore harbor is another unforeseen impact on the 2024 economy.  Though preparation for the removal of sections of the bridge has started, it remains unknown when the port will reopen. It is estimated that 8,000 jobs are at a standstill due to the port closure. The economic ripple effect of the closure remains a matter of conjecture depending on how long the port remains closed.   

Here are just several examples of what may impact your business plan for 2024. None of these may seem directly linked to your business but could have an adverse effect. My last article asked are you ready.

The question this time is … now what?

Contact Steve Bina: steve@humanpoweredsolutions.com.