The resilience of the US economy in 2023 presents a compelling opportunity for entrepreneurs and investors — as well as business advisors who can assist them both — in 2024. Contrary to the widespread predictions of an imminent recession and minimal GDP growth, the US economy exhibited remarkable resilience, growing at an impressive 3.3% according to the latest government data. This growth rate is noteworthy considering the modest expectations of around 1.5% annual GDP growth due to slow labor force growth, stemming from low birth rates. The real GDP growth in 2023 defied these expectations and demonstrated the underlying strength of the American economy.
The growth continued at a strong pace in the fourth quarter, with real GDP rising at an annualized rate of 3.3% from the previous quarter. While this was slower than the 4.9% growth in the third quarter, it’s important to note that the third-quarter growth was partly fueled by inventory accumulation. Thus, the underlying growth remained relatively steady from the third to the fourth quarter. This consistency is an important indicator of a stable economic environment, conducive to business growth and investment.
One of the key drivers of this economic resilience was consumer spending, bolstered by factors like moderate employment growth, rising real wages, and favorable financial conditions. Notably, debt service payments as a share of income remain historically low, enabling significant consumer borrowing. Real disposable personal income grew at a rate of 2.5%, with consumer spending growing even faster, indicating a reduction in savings. This trend suggests a robust domestic market, which is crucial for businesses looking to expand or maintain their market share.
Additionally, nonresidential investment continued to grow in the fourth quarter, rising at an annual rate of 1.9%. This growth is particularly significant given the tightness of monetary policy. High-interest rates typically stifle business investment, but this wasn’t the case in the recent cycle. The investment was diversified across equipment, intellectual property, and structures, indicating a broad-based confidence in the economy’s prospects.
Moreover, the Federal Reserve’s favored measure of inflation, the personal consumption expenditure deflator, increased at an annual rate of 1.7% from the third to the fourth quarter, marking the slowest pace since the second quarter of 2020. This moderation in inflation is within the Fed’s target, suggesting that the central bank’s policies are effectively balancing the need for economic growth with the control of inflation.
In light of the robust and resilient economic environment in the United States in 2023, the experiences and strategies of individuals like Michael Steinberg, founder of Hedgestone, are particularly relevant as we move into 2024. Steinberg’s expertise in navigating various economic situations from diverse socio-economic standpoints is invaluable. Hedgestone, as an educational and community platform, offers courses, podcasts, informative content, group calls, and more, all aimed at educating and supporting individuals in business endeavors.
Steinberg’s achievements, including brokering an $85 million hotel deal and a $50 million car washing chain deal in just four months, exemplify the kind of success possible in a thriving economy. His portfolio, built upon acquisitions and sales of various businesses such as pizzerias, car washes, and laundromats, demonstrates a strategic approach to business growth and investment.
Moreover, Steinberg’s advocacy of seller financing is a strategy that aligns well with the current economic conditions. Seller financing not only builds trust between buyer and seller but also offers financial advantages such as the deferral of capital gains taxes and the potential for faster transaction processes. This method, taught to the Hedgestone community, is a testament to the need for adaptive strategies in a dynamic economic landscape.
In conclusion, the US economy in 2023 was characterized by steady growth and moderate inflation, presenting a fertile ground for entrepreneurs and investors now that we are in 2024. The insights and experiences of individuals like Michael Steinberg, along with platforms like Hedgestone, offer valuable guidance in capitalizing on these opportunities. Their approaches underscore the importance of being adaptable, knowledgeable, and strategic in leveraging the current economic conditions for sustainable growth.
Written in partnership with Tom White.
