2024 is shaping up to be a great year for the U.S. economy, and that comes as good news to us in the auto industry. Goldman Sachs Research (GSR) is predicting that the economy will grow by 2.1%, beating its peers’ consensus of 1%. For dealers, this means there will be plenty of potential for selling new and used vehicles.
Economy’s Steady Ride, Despite Bumps in the Road
We have a low chance (15%) of hitting a recession in the next year. Inflation worries are easing up, and the market is looking more stable as a whole. Edmunds predicts dealers will sell 15.7 million new cars and trucks in 2024 – that’s about 1% more than last year.
Why Things Are Looking Up
Inflation has gone down without driving up unemployment, which was a surprise to many. GSR says this is thanks to more people working again, changes in pay and prices settling down, and factors like more houses for rent being built. The main inflation measure, the Personal Consumption Expenditures Price Index, was at 2.6% in November – very close to the Fed’s target of 2%.
Data vs. Everyday Life
GSR predicts that the toughest part of controlling inflation is nearly over. Unemployment is staying mostly the same, but other signs of a tight job market are easing. However, consumers still indicate they are feeling pressure from elevated prices, so it may take some time before buyer sentiment aligns with the economic data on falling inflation. The combination of high interest rates and home prices, along with retail price increases that have stuck around post-pandemic, are leaving some feeling that their paycheck does not stretch as far. Dealers will need to be aware of price sensitivity throughout 2024.
What’s Next for Interest Rates and the Economy
With inflation dropping and jobs staying strong, GSR expects the Fed rate (the basic interest rate) to stay the same until a small cut happens at the end of 2024. It is forecasted to gradually decrease to 3.5-3.75% by mid-2026. At the time of publication, the Fed rate was at 5.5%.
In 2024, people are expected to keep spending, helped by more disposable income and job growth. Business investments might slow a bit due to funding challenges, but tech investments and reduced recession fears could lift spirits. Home sales are expected to be slower due to high mortgage rates, and government spending should stay the same.
Time to Accelerate Your Sales
2024 should bring modest growth, with strong spending by consumers, careful business investments, and slower home sales. The job market looks set to stay stable, which is a good sign for the U.S. economy and for us in the auto world. For auto sales, that means it’s time to step on the gas and lean into advertising. Contact us at Strong Automotive when you’re ready to shift your sales into high gear for 2024.
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John Paul Strong
John Paul Strong combines his two decades of automotive marketing experience with a team of more than 150 professionals as owner and CEO of Strong Automotive.
