👀 What You Need to Know About 2024’s Economy

Are you a little nervous about the economy this year? As we peer into the economic landscape of 2024, uncertainties abound. It’s no wonder business leaders everywhere are tightening budgets and shaking in their boots.

Having experienced a tumultuous journey in recent years, we’ve invested heavily in investigating potential trajectories of interest rates and understanding inflation’s potential impact on businesses and consumers alike.

Benjamin Tal, Managing Director and Deputy Chief Economist of CIBC Capital Markets Inc. joined The CFO Show to share the economic insights every CFO should know to enter the coming year strategically.

Here’s what we uncovered:

The striking difference between Canada and the US 

In the past six months, Canada’s economy has expanded by 0% — a stark flatline compared to the US’s economy expansion of 5.4%. But why?

Productivity: The US has increased productivity by 3.5% while Canada is seeing numbers in the negative. 

Fiscal policy: If you think Trudeau is spending a lot, take a look at Biden’s spend. It’s 3-4 times higher than that of Canada. 

Interest rate sensitivity: Canada’s five-year mortgages result in the impact of interest rate changes hit consumers far more quickly than in the US, where mortgages span 30 years. Because of the extended rates, interest rate fluctuation takes much longer to affect US consumers. 

What it means for you: According to Benjamin, we can expect the US to slow down in the coming year, following a trajectory similar to Canada’s. In the meantime, productivity should become a key focus for Canadian businesses. 

The labor market and a trajectory for wages

It’s no secret COVID-19 affected the economy and the labor market. Mere years ago, Canada was experiencing a major job vacancy problem with over one million unfilled positions.

Fortunately, the labor market is normalizing.

Economically speaking, when there is a shortage the solution becomes more valuable. But given most of these positions were in lower-wage roles, Canada didn’t experience the wage increase that most expected given the potential impending recession. 

These vacancies are dropping in numbers—population growth keeping pace ahead of employment growth. 

This year, we won’t see decreases in wages, but as the labor market normalizes, we will see the speed at which wages rise slowing down.

Four downward forces on profit and what you can do about them

As the economy flatlines, Benjamin says we will see four major downward forces on profit that will either spark a mindset and strategy change in businesses or leave them breaking even—or worse—dipping into the red.

Force #1: Deglobalization 
Force #2: Inventory shifts from ‘just in time’ to ‘just in case’
Force #3: Tightened labor market
Force #4: Increased green initiatives

The solution: Faced with these downward forces, businesses will have two choices:

1. Pay up

2. Do something about it

Looking at the numbers, there is one major mindset focus that must take the lead in the coming year. 

Productivity. 

Whether that’s gained through increased productivity initiatives, technology integration or automation businesses will have to replace labor with capital, meaning some must uproot their existing behavior. 

The surprising role of AI

Don’t worry just yet, AI isn’t coming for your job. But people leveraging AI for increased productivity might be. With ever-growing sophisticated technologies emerging to slice your best employee’s task time in half, failing to leverage new systems might make or break your productivity this year. 

AI alone isn’t enough—but as the tech grows and develops, human capital isn’t enough either. 

Productivity has to be top of mind in 2024—and AI is at the forefront of that shift. 

This year we may see lower interest rates, a stabilized supply chain and inflation relief. Tune into The CFO Show today for everything you need to know to catalyze your business and your career.

In case you missed it…

Your organization is counting on you to drive innovation. With digital transformation defining every step forward in today’s business world, it can feel near-impossible to figure out exactly where to jump in. We spoke with  Nicolas Herman CFO of Microsoft Americas Enterprise, and found the perfect balance between fueling innovation and maintaining operations (while avoiding rabbit holes and distractions).

What’s next…

In addition to sailing a smooth ship in finance, we’re also tasked with optimizing the financial and operational performance of the organization on the whole. One major task finance professionals undertake is guiding the organization towards areas of investment and helping it calibrate around timing and quantum. Tom and Melissa join together to discuss how to best navigate the (sometimes turbulent) waters of investment.