Any entrepreneur or businessperson who knows what they are doing will be keeping a close eye on the economy. It is constantly changing, but some changes can affect you and your business more than others.
Understanding the ebbs and flows of the economy and your market can help you ride the waves and stay afloat. So, what will it look like in 2022? Read on to find out.
IMAGE: https://pixabay.com/illustrations/dollar-rate-world-economy-boom-544949/ (Pixabay)
The economy overall
It seems the results of recent events over the past two years haven’t been as devastating to the economy as we all feared, according to the New York Times.
When lockdowns were enforced, many industries and commercial sectors witnessed shutdowns in their field, some just partially, some big brands entirely wiped off the map. But the economy is stabilizing. With the reopening of premises, industries are facing new problems like stock shortages and breaks in the supply chain. It is a story of a country trying to put itself back together after a catastrophic event. While the inner workings are starting to see some semblance of normality, the influences outside the country, namely trades, are still on shaky ground trying to get back to normal.
There are promising predictions, however. The Organization for Economic Cooperation and Development released a report in early October that said that the world economy would grow 4.5 per cent in 2022. It isn’t as promising as the expected 5.7 per cent that was expected for 2021, but it’s also nothing to turn your nose up at.
As for the United States itself, there is less to be optimistic about. The predicted 6 per cent growth in GDP in 2021 has shifted down even more to 3.9 per cent. It’s a significant drop, but still shows growth. In fact, it would be a faster growth than has been seen in the United States since the turn of the century. It could demonstrate a settling economy, floating safely but cautiously.
But how will this affect business loans?
Will interest rates rise?
Unfortunately, that’s hard to determine. If you are looking for a business loan you can compare the best business loans on the Lendstart website for example. It would be best to compare and look for the best deals you can, since interest rates may have to rise higher in 2022.
Experts say that due to the winding down of the pandemic-era stimulus program, US interest rates will quickly have to rise to respond to the higher inflation expected in 2022.
This comes after leading academic economists for the Financial Times were polled on their predictions for 2022. The survey, created by the Initiative on Global Markets at the University of Chicago Booth School of Business, points to an aggressive tightening of monetary policy, more than the Federal Reserve’s most recent predictions were to indicate.
The survey shows that over 70 per cent of the respondents expected a raise in rates from the Federal Reserve by at least 0.25 per cent in 2022.
However, the US Central Bank has assured the public that they will commit to the current pace of purchases until the economy stabilizes. What this means is that they intend to see 2 percent inflation and maximum employment before they raise prices. The former of the two has been met according to officials, and the latter is getting there. Unemployment is expected to stay high through 2022, with minimal change seen between the recorded 5.2 per cent in November and 4.9 per cent in December. 43 per cent of the experts surveyed predicted that the rate of unemployment won’t fall to its pre-pandemic rate of 3.5 per cent until 2023.
But the experts are skeptical that the US Central Bank will keep to their promise. For example, Danny Blanchflower, economist at Dartmouth University and former member of the Bank of England’s Monetary Policy Committee, expressed that he expected the US Central Bank would make an error and raise rates too soon.
The takeaway
The economy is currently a mixed bag of good and bad at the moment. Yes, it’s taken a hit from the events of the past couple of years, but there is hope. Things are stabilizing as industries reopen.
However, business owners should prepare for stock shortages, whether they buy in bulk or in monthly installments. If the opportunity arises, a business loan can help businesses replenish their stock in bulk buying. The US Central Bank has assured the public that interest rates won’t rise until unemployment rates rise, and that isn’t predicted to be until 2023. Perhaps it would be best to take out a fixed interest rate loan and maybe before the start of 2022.
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