market outlook Travel’s recovery exceeded all expectations


services inflation – are still fairly high. The expectation is inflation will be just under 3% by the end of 2024. “Markets expect the first cuts to


interest rates in the summer, then for rates to fall gradually because inflation is likely to remain above target probably well into 2025. Investors foresee a gradual easing to around 3.2% by the end of 2026. A year ago, markets expected rates to have fallen to 2.5% by then, so this is a significant uprating of expectations.” He noted: “The channel through


which higher interest rates largely impact consumers is the mortgage market and, given one-third of British households have mortgages, the impact is limited to those. You could argue there is an indirect impact on those who rent as landlords pass on higher costs. But broadly the effect is limited. By the Bank of England’s estimate, about half the impact of rate rises had been felt by consumers by autumn 2023, with at least a year and a half to go before the full effects. “So, there is going to be some drag on


consumer spending. Having said that, the ‘lag’ helps because wage rises will offset some of the drag on spending.” De added: “Unemployment has risen a


little and we’ve seen consecutive months of falls in the number of vacancies [with] some early signs of slack developing in


FIGURE 15: CORPORATE TRAVEL OUTLOOK 2024 budgets compared with 2023 Don’t know


Significantly lower*


2%8% 5% Lower 18% 39% 25% 28%


About same


*25% higher or lower than 2023


Considering limit on travel


32%


Wait-and-see approach


Source: GBTA, October 2023 Base: 865 GBTA members


12 Travel Weekly Insight Report 2024


Significantly higher*


Higher Impact of economic outlook Plan


to limit business travel


14%


Don’t know


4%


Unlikely to limit travel


25% FIGURE 14:


INTERNATIONAL BUSINESS TRAVEL BOOKINGS, LATE 2023


% of 2019 bookings


Less than 20%


40% 21- 7%


12% 8%


23% 41-60% 61-80%


Source: GBTA travel buyers, October 2023


81-100%


Not sure


9%


Exceeded 2019


15% 26% BUSINESS CONFIDENCE


“Business confidence took a bit of a hit over summer 2023 when inflation surprised on the upside and rate expectations rose. But our latest survey of chief financial officers (CFOs) shows optimism improved since then. CFOs expect growth this year, although not imminently. Cost reduction is still the top priority for business leaders, followed by increasing cashflow. CFOs do not expect a return to the low-interest, easy-money era of the post-financial crisis world.” Looking beyond the UK, he said:


“Inflationary pressure in Europe seems to be weaker than in the UK. Despite that, most European economies are forecast to grow at well below their trend growth rates. There is a significant slowdown expected in Spain, which grew strongly last year, and Germany seems to be in recession. A German recession would have a broad impact on Europe because Germany is the largest European economy and a big source of external demand for others. Slowing growth in China also dampens a huge source of demand for Germany. “A year ago, economists were


concerned the end of China’s zero-Covid policy would mean inflation proved harder to tame in the West as China would boost global demand. That hasn’t come to pass. In fact, demand has been weak in China. We haven’t seen the sort of rebound we saw in the West once restrictions were eased. Despite that, China’s economy is expected to have grown by 5% in 2023.” De argued: “The US, of all western


economies, is probably the closest to pulling off a ‘monetary miracle’ – seeing off high inflation and substantial rate rises without a recession. However, economists forecast a significant


the labour market, but it remains quite tight. Given that, and the downward trajectory of inflation, I expect real wages to continue rising through 2024 even if unemployment rises slightly. That should support consumer spending.


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