Collier EBCS: First Quarter 2024 Report
The US economy remained strong during the fourth quarter of 2023, as evidenced by national indicators available in January 2024. Advanced estimates of real gross domestic product (GDP), a measure of overall economic activity, deaccelerated from the third to fourth quarter of 2023, but still outpaced expectations with a 3.3 annualized rate of growth. The national labor market also remained resilient, headlined by a 3.7 percent unemployment rate in December. Both labor force participation rates (62.5 percent) and employment-to-population ratios (60.1 percent) were relatively unchanged compared to December 2022.
Furthermore, the Personal Consumption Expenditures (PCE) price index, the preferred inflation measure of the Federal Reserve, was up 2.9 percent in December 2023, inching closer to the Federal Open Market Committee (FOMC) price mandate of 2 percent. At the latest FOMC meeting in January, the committee noted the progress of inflation, but held rates constant for the fourth consecutive meeting, remaining between 5.25 and 5.50 percent. During his January 31, 2024 press conference, FOMC Chair Jerome Powell hinted at the possibility of rate cuts in 2024, but noted that March was likely not going to be when the rate cuts would begin, citing the need for “more evidence” in falling inflation. “Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that’s to be seen,” Powell said.
Sentiment amongst consumers at the national level soared from November to December 2023, rising 8.4 points. Furthermore, January 2024 preliminary estimates demonstrated that this increase was no fluke, as the advanced estimates suggest another 9.1-point improvement over December 2023. Joanne Hsu, director of the University of Michigan Survey of Consumers, noted that “consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations. Over the last two months, sentiment has climbed a cumulative 29%, the largest two-month increase since 1991 as a recession ended.”
At the local level, Collier County business owners were increasingly more positive during the first quarter of 2024. The Executive Business Climate Index (EBCI) rose 1.3 points from the fourth quarter of 2023, with two of the three components improving. Other indices tracking future economic activity improved, with expectations for hiring rising 0.5 points and expectations on investment increasing 2.9 points. Despite the improvements, the EBCI remains beneath pre-Covid levels, when the index measured at 66.4 during the first quarter of 2020.
The latest quarter also asked respondents questions relating to artificial intelligence (AI). Results found that while majority of Collier County business owners were at least somewhat familiar with AI (84 percent), three out of five responding executives said they did not use AI to assist with work activities. Among those that did utilize AI in their business, most respondents stated they have been using AI for no more than one year. More than half of respondents using AI agreed that the use of AI had saved time and allowed them to work efficiently, while also agreeing that the implementation of AI had grown their business faster.
On the other hand, about three fourths of respondents not currently using AI indicated they were not too likely to invest in AI over the next 12 months. Three primary concern regarding AI were voiced by these respondents – (1) concerns about the security of data, (2) lack of AI/automation tools built for their business and (3) did not feel it would help their business. Regardless whether or not they currently used AI, nearly three out of every four respondents believe AI with be at least somewhat important for their business over the next five years.
We would like to thank all of the executives that participated in our survey. Without your continued feedback each quarter, our surveys would not be possible. Furthermore, we would also like to thank our sponsors, Collier County Government and the Greater Naples Chamber of Commerce, for helping make the survey happen.