1. 2023 appropriations followed by the return of budget uncertainty. Questions about government budgets and spendings always seem to be at the top of the list. Congress provided agencies and the companies that serve them with a holiday gift by passing appropriations for 2023. The omnibus bill provides $1.7 trillion in funding for FY 2023, an increase of roughly 8 percent from the prior year. While that provides near term certainty, stability and growth for federal agencies with changes in Congress and the debt ceiling approaching, uncertainty is likely to return as we approach FY 2024.
2. Inflation outlook. Questions about impacts from inflation go hand-in-hand with uncertainty about the budget. Although inflation rates are expected to decline at least somewhat, government contractors across a wide range of industries are still experiencing challenges or recovering from a period of heavy inflation. Going forward, they will continue to experience some inflationary increases in intermediate and final goods, energy and talent. With costs higher and increased competition, contractors will need to take a close look at pricing strategies and make sure they are using all the tools they have available to remain competitive.
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