With US demand softening and domestic production inflation still a factor, the 2023-2024 bankruptcies and layoffs in the furniture sector are warning flags that geographic exposure to cost is strategically existential. Attention here is once again focusing on production locations, in the face of some harsh numbers.
In 2024, the global economy is expected to register slowing growth for the second consecutive year. This is primarily due to the dampening effect of high interest rates in most major economies globally, in addition to weakening growth in China, the world’s second largest economy. Yet, this comes after global growth consistently outperformed expectations in 2023, withstanding numerous headwinds, especially ongoing and widening geopolitical tensions.
The era of high interest rates is expected to stay for some time, as persisting price pressures and geopolitical risks continue to challenge central banks in key economies in bring inflation back to their targets. As businesses and households increasingly feel the financial pressure coming from high interest rates, they will further adjust their spending and borrowing behaviour.
As inflation begins to cool down worldwide due to slower economic growth, stricter monetary policies of banks and supply chain improvements, Japanese consumers are still struggling to deal with the country’s inflationary environment as households are dealing with unfamiliar rises in consumer goods prices while not seeing wages keep pace.
Lower energy, housing and food prices are forecast to contribute to the easing of inflationary pressures in the US in 2024. However, rising prices of services will leave consumers cautious on spending despite the improving macroeconomic conditions. Companies understanding these consumer insecurities and providing a stronger value proposition can gain an advantage and prepare for long-term growth.
Amid the global economic slowdown, weaker private consumption, business spending and capital investment are expected to weigh on commodity demand and curb price growth. However, the outlook remains highly uncertain due to elevated geopolitical risks, which could lead to supply disruptions and intensify price volatility, especially in energy markets.
Global inflationary pressures are forecast to moderate further in 2024. Under the baseline scenario, global inflation is predicted to stand at 4.9% in 2024, down from 6.9% in 2023. Stricter monetary policies, weaker economic growth and a consequent demand slowdown are helping to ease the price pressures.