Lee EBCS: Fourth Quarter 2023 Report
Neither the US nor Southwest Florida experienced any semblance of a recession that experts have predicted for a while in the third quarter of 2023. For starters, the Bureau of Economic Analysis reported real gross domestic product (GDP) for the US economy grew at an annual rate of 4.9 percent in the third quarter advanced estimates, up 2.8 percentage points from the prior quarter and the highest estimate since the fourth quarter of 2021. Labor market conditions also remained resilient, as the national unemployment rate came in at 3.8 percent in September 2023, unchanged from the prior month but up 0.3 percentage points from September 2022. The labor force participation rate continued to improve as well, rising to its highest level since February 2020 at 62.8 percent.
Yet, uncertainty on how the national economy moves forward remains a popular topic of discussion. A Federal government shutdown was averted in late September as lawmakers came to an eleventh hour agreement that would fund the government through mid-November. The Federal Open Market Committee (FOMC) maintained the federal funds rate at 5.25 to 5.50 percent in their latest meeting on September 20, stating that “tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain.” FOMC Chair Jerome Powell, at an October 19 luncheon, further noted that “additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.”
Sentiment amongst consumers was not as positive in the third quarter, as the index slipped from 71.6 in July to 68.1 in September. Joanne Hsu, director of the University of Michigan Survey of Consumers, noted in the September 2023 survey results that “consumers are understandably unsure about the trajectory of the economy given multiple sources of uncertainty, for example over the possible shutdown of the federal government and labor disputes in the auto industry. Until more information emerges about these developments, though, consumers have reserved judgement on whether economic conditions have materially changed from the past few months.”
Uncertainty among business owners was also evident at a local level, according to results from the latest Executive Business Climate Survey. The Executive Business Climate Index (EBCI) dipped 6.6 points from the third to fourth quarter, primarily fueled by a moderate decline in expectations for local economic and industry conditions over the next 12 months. Other indices tracking future economic activity also saw declines from the prior quarter. Expectations for hiring over the next 12 months slipped 4.8 points, while expectations for investment spending over the next year fell 2.0 points. The EBCI remains beneath pre-Covid levels as well, when the index measured at 62.5 during the first quarter of 2020.
The latest survey also asked respondents questions relating to financing. The survey found that only 19 percent of respondents applied for FEMA or SBA support following Hurricane Ian and that 75 percent of those that applied actually received the support they applied for. Furthermore, 85 percent of owners said that obtaining loans today was more difficult than 12 months ago, while 76 percent also expect it to be more difficult over the next 12 months as well. When offered the chance to provide open-ended comments at the end of the survey, the three primary topics that were discussed by business owners were high inflation, lack of affordable housing and lack of qualified labor.
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 sponsor, the Horizon Council, for helping make the survey happen.