At the GlobeSt.com Multifamily conference, CBRE global chief economist Richard Barkham forecasts 6% GDP growth in 2021 and 2022, below the initial expectations.
The economy is springing back from pandemic-fueled downturn that marked 2020. At the GlobeSt.com Multifamily conference earlier this year, Richard Barkham, global chief economist and head of Americas research at CBRE, gave an economic forecast for the multifamily market, starting with a macro view. He had a optimistic outlook for the economy, although he did not temper expectations for the current expansion.
Specifically, the current CBRE research forecasts 6% GDP growth this year and next year, with a more mild expectation of 4% GDP growth in 2023. While this is still strong growth expectation, Barkham notes that they are below the firm’s forecast at the beginning of the year, which pegged closer to 7% growth this year.
In addition, any impact from the Delta surge is officially over. The economic-related fallout from the third wave earlier this year mainly occurred in the South, but even there, it had minimal impact on the economy. There was a minor flattening in growth, but segments of the market, like air travel and food and beverage purchases continued to grow.
While Barkham’s economic forecast was optimistic, he did note pressure points that could alter the course of the growth. The port backlog was on that list. There is currently a line of ships at the Ports of Long Beach and Los Angeles to waiting to unload. It is just one example of the major supply chain disruptions caused by the pandemic. “The supply side is trying to catch up,” said Barkham.
However, there is a secondary reason for the backlog: a lack of labor. Many people have not reentered the labor market following the pandemic, and as a result, essential jobs are going unfilled. “People are rethinking their lives,” said Barkham, adding that the expanded unemployment had little to do with the labor shortage. Instead, he pointed to increased savings during the pandemic that is giving people more options. Normally household back accounts represent about 35% of GDP Today, they account for 74%. People are sitting on cash, and it is allowing people to have more options to stay out of the work force.
Restricted economic growth in China is also one of Barkham’s concerns. In the third quarter, the country’s massive economy reported only 1% GDP growth. Comparatively, it has had 7.8% quarterly growth from 2010 through 2019. This is largely due to supply chain disruption as well as new energy regulations. The drag in China is currently having a positive impact on the US economy, helping to drive the low interest rate environment and taking the pressure off of inflation. Overall, this has been a net positive, but it is a risk and a trend that Barkham is watching closely. For now, he is encouraged. “We are in a world where bad things can be good.”