Summing up 2023 and looking ahead to 2024
With wars on two continents, 2023 was dominated by dismal world news. The economic news closer to home was only a little better. But how we sum up 2024 by this time next year will depend entirely on you.
Why 2023 was a weird year economically
Many economists were confused by 2023. Was there a recession or not?
In July, the World Economic Forum declared, “U.S. may already be in recession.” Six days later, CNBC ran this headline: “Fed staff economists no longer forecasting U.S. recession, says Jerome Powell.”
It wasn’t just the experts who were confused. A poll that same month found 68% of Americans expected a recession before the end of the year – and 80% expected it to be “severe.”
The right answer is both. There wasn’t a severe recession, but there was what I call a “sleeper recession.” It’s akin to suffering long COVID. You’re still sick, but not so sick you can’t go to work. You feel generally miserable, and while you’re not at your best, you keep plodding on, waiting for things to change.
That was the 2023 economy.
Just when you thought you were recovering, inflation lingered like a low fever. So did supply chain issues that you thought were going to ease long ago. Over the summer, interest rates spiraled, peaking in September at nearly 8%. Then in October, student loan payments resumed.
That might be why 2023 saw the popularity of a new term: vibecession. While coined in 2022, it took off in 2023 to describe how people feel about the economy. In 2023, the disconnect was noticeable to experts and pollsters. Most Americans believed the economy was worse than it really was.
While economists wondered what caused this disconnect, it was easily apparent to a debt counselor like me. Human beings can handle really bad news when it’s brief, but they struggle with mildly bad news that lingers. During the Great Recession and the Pandemic, Americans spent less and saved more. Once the bad news was over, they reverted to their budget-busting ways.
In 2023, it wasn’t just one heavy blow, but many slaps across the face. We couldn’t catch our breath before the next slap came. Thankfully, 2024 will be easier.
Why 2024 can be your year financially
Here’s the first ironclad prediction for 2024: Inflation will keep dropping, but prices won’t.
Picture it like this: If your favorite sub shop charged you $5 for a hoagie at the beginning of 2022 and raised that price to $8 in 2023, even if inflation plummets in 2024, that price will only come down to $6. Say goodbye to that $5 sandwich forever.
I’m not going out on a limb here. History shows that after a spike in inflation drops, prices rarely revert to what they were. While prices do come down, it’s not to pre-inflationary levels.
So while economists predict inflation will drop from a high of 8.5% to under 2%, prices won’t drop by those same proportions. The reason is simple: Businesses don’t have to. Most consumers will simply be relieved that prices are dropping. They won’t remember exactly what they were two years ago. (I don’t remember what I had for lunch last Tuesday, do you?)
Those same economists predict interest rates will also drop – but not to the ultra-low rates we saw during the Great Recession or Pandemic. How much interest rates come down depends on what the Federal Reserve does, and its Board of Governors don’t tell you in advance. Right now, they don’t know, because it takes time to crunch data on inflation and unemployment, plus CPI (Consumer Price Index) and PCE (Personal Consumption Expenditure).
So overall, 2024 should be a year of plummeting inflation and interest rates, and even the “sleeper recession” could start to fade. The one big variable is…consumer debt.
In 2022, credit card debt rose by $116 billion, for a total of 1.23 trillion overall. NerdWallet anticipates Americans will add another $100 billion in 2024. While that’s a drop, it’s still an unsustainable upward trend.
Economies like the one experts are predicting for 2024 are exactly when you should be paying down your credit cards. Inflation and interest rates will drop, and even with prices permanently elevated, they’ll still come down. If you can’t build debt repayment into your budget, when will you ever?
This is the time to get professional help with your personal debt. If you want 2024 to be the year you look back on as the first step to financial freedom, call a debt expert. Whatever year it is, you’ll get a free debt analysis and a list of options, personalized to your situation.
Experts make a lot of predictions about the macro economy. Some come true, some don’t. But I can make this prediction about your economy: It’ll be better with less debt.