If the economy feels shaky, uneven or volatile these days, Dr. Bob Dieli says there’s a reason for that. The MacKay & Company economist says the U.S. economy has been in a boom period for a while. It’s heading for a peak, and once it gets there, things are going to change.
Speaking Monday at Heavy Duty Aftermarket Dialogue, presented by MEMA and MacKay & Company, in Grapevine, Texas, Dieli says the current business cycle has remained in its boom period for longer than anticipated. He doesn’t expect that to continue through 2024, and says MacKay & Company’s Enhanced Aggregate Spread (EAS) and Truckable Economic Activity (TEA) metrics indicate the year ahead will be the beginning of a slowdown.
How much of a slowdown? Dieli says that remains to be seen.
TEA, which has long been a predictive tool for economic fluctuations, is negative for five of its six main categories. Dieli says the only category not in the red is government activity, which he attributes to local and state spending due on infrastructure. EAS has also fallen into an area that generally syncs to a recession, though Dieli says there once was an incident in the past where the EAS was in a recession-adjacent range and a recession didn’t occur.
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Looking ahead, Dieli says once the business cycle peaks later this year, the economy’s decline could go in several directions. He says a soft landing is “possible but not probable,” and will be determined by how the Federal Reserve continues battling inflation.
Dieli says the Fed has been mood because of inflation for a while. The inflation experienced the past two years “was everywhere at the same time, which hadn’t happened in decades,” he says, and has made it tricky for bankers to pin down exactly where interest rates need to be.
