We anticipate that inflation – as measured by the US Bureau of Labor Statistics’ Consumer Price Index quarterly rate-of-change – will reach a cyclical low in the latter half of 2024.
This low will come with a feeling of great relief for consumers and businesses alike, noted ITR Economics CEO Brian Beaulieu and President Alan Beaulieu in their July 27 Executive Series Webinar, “2030s Great Depression Update.”
The feeling of relief will not last.
“When politicians and others are saying, ‘Good, it’s over,’ remember that it’s not,” Alan told the webinar audience.
“There’s a whole other round of inflation to contend with,” Brian said.
Between the end of the 2024 downturn and the onset of the next depression – arriving around 2030 – inflation will be an issue.
- For many business leaders, it will be like nothing else they have experienced, other than the post-COVID surge that many have written off as an “outlier.”
- For many of them, “normal” inflation is what was experienced during the pre-COVID decade, during which CPI inflation averaged 1.8%.
Inflation Drivers
- Rising wages will be a cause of inflation as we draw closer to 2030.
- Members of the baby boomer generation are retiring and will continue to retire through the 2020s, with the youngest boomers reaching age 65 in 2029.
- The aging workforce, combined with the economic growth during the second half of the 2020s, will keep the labor market tight and wages rising.
- Prices will rise alongside wages. Then wages will rise further to keep up with prices. Then prices will rise further to keep up with wages. Etc.
- Economic rise and increasing industrial activity will keep materials and components in demand, also begetting higher prices.
- Nationalism-oriented economic attitudes versus choosing cost-effectiveness and efficiency will create additional price rise.
Urgency: A Challenge Alongside Inflation
Outwaiting the second-half-of-2020s inflationary period will not be an option.
- Once we move past 2024, generally elevated inflation (relative to recent years) will be a longer-term factor. We expect it will be part of the economic landscape for several years.
- The 2030s depression awaits on the other side.
- Therefore, business leaders will have to ensure that their companies not only survive, but thrive, during the inflation years, as they will be the last years of economic rise before the age of decline.
2024: Not Time to Batten Down the Hatches
Preparing your business for the 2030s depression – which Alan called “the most serious economic event you will face” – will involve building up both your volume and profitability. That means gaining market share without giving up ground on your margins.
The margin piece is difficult when inflation is “normal.” When inflation is elevated, business leaders will have to adopt a whole new mindset.
- “Every dollar has to count,” Alan said. “Investments should increase efficiency.”
- Such improvements must be pushed even during the 2024 downturn, when a defensive posture and risk-averse mindset will be the default for many.
- Furthermore, your customers will need a strong reason(s) to choose your products/services other than your prices.
So, come late 2024, do not think of the post-COVID inflation bout as over and done with. Instead, look to it as an instructive reference.
“Figure out what you wish you had known back here,” Brian said, referencing the post-COVID inflation spike, “and apply it, because you’re going to get another shot at it.”
For more on inflation and much more on the coming 2030s depression, watch the recording of Brian and Alan’s webinar. Also, subscribe to our updates to keep up with economic trends and our analysis of current events.
