Lee EBCS: Third Quarter 2024 Report
August 01, 2024 / RERI Research Team
Lee County Executive Business Climate Survey Third Quarter 2024 Report
Data from the second quarter of 2024 suggests that the national economy is beginning to slow, though signals are still mixed. While the labor market remains strong, the seasonally-adjusted unemployment rate rose slightly to 4.1 percent in June, marking the highest level since October 2021. In contrast, advanced estimates for real gross domestic product (GDP) were more optimistic, showing a 2.8 percent annualized increase and surpassing expectations for the second quarter of 2024. This followed a weak first quarter when real GDP grew at a meager 1.4 percent annualized rate. GDP gains come as sentiment among consumers, who represent roughly two-thirds of total GDP, fell during the second quarter, dropping 11.2 points from March to June 2024. Commentary from the June survey suggested that consumers continue to express concerns about high prices and weakening incomes on their personal finances.
Optimism among small businesses, as measured by the National Federation of Independent Businesses (NFIB) Small Business Economic Trends, improved to 91.5 in June 2024 but remains suppressed compared to its fifty-year average of 98.0. When asked to identify their top business problem, 40 percent of small businesses said inflation was the primary issue. Inflation has improved since the last quarter, progressing closer to the Federal Open Market Committee’s (FOMC) two percent inflation target. Core inflation (all goods minus food and energy) measured by the Consumer Price Index (CPI) declined to 3.3 percent in June 2024. The Personal Consumption Expenditures (PCE) price index, the FOMC's preferred inflation measure, corroborated findings from the CPI, with core PCE holding steady at 2.6 percent in June.
Despite the improved inflation conditions, the FOMC opted to maintain the federal funds rate at 5.25 to 5.50 percent for at least six more weeks. The latest FOMC press release noted that “the economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.” While the FOMC is unlikely to pre-commit to any rate cuts, markets are more bullish on the prospect of lower interest rates in the near future. The CME FedWatch tool, which calculates probabilities for Fed rate changes based on fed funds futures, attributes a 94 percent chance for a 25 basis-point cut occurring during the September meeting (as of July 31st, 2024).
A slowdown in economic activity is also evident locally, according to the latest Lee County Executive Business Climate Survey (EBCS). The Executive Business Climate Index (EBCI), which measures the business climate in Lee County, showed little change, rising just one-tenth of a point to 55.4 in July. The EBCI remains beneath pre-Covid levels when the index measured 62.5 during the first quarter of 2020. There is some disconnect between local and national businesses with respect to expectations. For instance, while only 8 percent of surveyed businesses in the NFIB survey expect business conditions to improve by the end of the year, 42 percent of respondents from the latest EBCS expect the local economy to improve over the next 12 months.
The latest survey also asked respondents about cybersecurity in their businesses. As technologies like artificial intelligence and large language models continue to improve, integrating cybersecurity has become increasingly important for businesses to remain ahead of the curve. The recent CrowdStrike outage, which occurred after the conclusion of the latest Lee EBCS, further highlighted the importance and interconnectedness of cybersecurity in businesses' daily activities. Nearly a quarter of respondents said that their business had experienced some sort of cybersecurity incident in the past. Furthermore, 81 percent said that they were somewhat or very concerned with potential cybersecurity threats. The majority of surveyed businesses had some sort of cybersecurity measure in place, including antivirus software, firewalls, and regular software updates.
Downloads:
Lee County Executive Business Climate Survey Third Quarter 2024 Report
Previous Lee County Executive Business Climate Survey Reports
Acknowledgments:
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 partners, the Horizon Council and Lee County Economic Development, for helping make the survey happen.
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