Travelers analyst ‘bullish’ on economic outlook

ORLANDO – The United States is unlikely to go into a recession in the next 18 months, despite various headwinds impacting the global economy and the construction sector, an economist and analyst at Travelers Cos. Inc. said Monday.

Stronger-than-expected GDP growth of almost 5% in the third quarter is “a good and unexpected outcome,” said Joan K. Woodward, executive vice president of public policy for Travelers and president of the Travelers Institute.

“We’re pretty bullish at Travelers in our economic modeling and the outlook right now. We don’t see a recession next year. That could change,” Ms. Woodward said.

Ms. Woodward was speaking during the opening session of the 43rd IRMI Construction Risk Conference in Orlando.

Economic growth and investment in the construction sector has also been boosted by the passage of the Infrastructure Investment and Jobs Act, and the CHIPS and Science Act, she said.

But construction businesses need to keep an eye on various headwinds, including inflation and the Middle East conflict, Ms. Woodward said.

The conflict in the Middle East has a “ripple effect” on oil and gas prices, inflation, and supply chain. “We don’t know what’s ahead of us here,” she said.

After reaching 9% last year, inflation is subsiding again, she said. “We’re back down to 3.7%, which is a very good outcome,” Ms. Woodward said. Wage gains and labor shortages are here to stay and among the factors that contribute to inflation, she noted.

Interest rate hikes by the Federal Reserve seem to be “doing their job to slay inflation. I know, not Beyonce when we say slay,” Ms. Woodward said, citing seven rate hikes last year and four this year.

The unemployment rate is also down, she said, which has helped keep stagflation at bay. Stagflation typically occurs when inflation is rising, economic growth is falling and the unemployment rate is rising, she said. “We didn’t have that. We were at risk of potentially falling into stagflation, except for the tight labor market, which caused the unemployment rate to continue to decline,” she said.

Consumer spending is another important indicator to watch, she said. “Consumer spending is the number one juice to the GDP economy,” Ms. Woodward said, adding that the resumption of student loan repayments has a contractionary impact on the economy.

“Students paying down loans versus spending money in the economy, buying new cars, buying maybe first houses,” she said.

Meanwhile, out of COVID-19 there has been a K-shaped recovery where Main Street is not feeling so economically sound as Wall Street, she said.

U.S. consumer sentiment fell to 60.4 in November, down from 63.8 in October, according to the University of Michigan’s latest consumer survey released Friday.