Overall optimism prevails despite uncertainty over 2025 macroeconomic climate

With 2025 just weeks away, how do local bankers feel about the nation’s macroeconomic climate and its implications on the banking industry and local economy in the year ahead? We checked in with three to find out.

“There is a lot of uncertainty as we move into 2025 for the economy,” said Michael Nowicki, commercial banking market executive at Bank of America Upstate New York. “We have seen growth in 2024, and I anticipate that growth to continue into 2025, with further increases in labor productivity and real income.”

Nowicki points out that consumer spending drives the economy, and in 2024 consumer resilience has been strong with economic growth showing little signs of cooling, despite higher rates and slower hiring.

“We expect continued positive GDP growth in 2025 with real income growth remaining positive in the years ahead, with decent job growth and wage inflation continuing to outpace price inflation,” he said. “Uncertainty does exist around policy changes in areas that include trade, fiscal policy and regulations, and their impact on the economy and inflation remains to be seen. Much of that will become clearer in the coming months.”

Nowicki says the expectation for continued growth, enhanced productivity and a strong consumer is positive not only for the banking industry but for the local economy.

“We see new businesses being formed, and they will need capital,” he said. “Existing businesses could expand and hire more workers. The banking industry is strong and able to support that expansion and the expected increase in loan demand.”

He notes that companies should lean on their bankers for advice and support to help navigate the complex financial environment.

“The expectations for growth in the economy will be positive for the Upstate New York market,” Nowicki said. “GDP-sensitive companies are positioned to do well in this environment. Conditions are positive for cyclical companies, of which we have many in our geography.”

He explained that the local economy should benefit from the Fed further cutting interest rates, along with the anticipation of reshoring of businesses, a productivity focus, and a strong refurbishment cycle as the result of the previous deferral of infrastructure spending.

“Fiscal expansion along with increases in jobs, real income, investment in capital expenditure to support growth and spending should all contribute to sustainable overall growth in our economy,” Nowicki said. “As the macro economy improves and expands, we all stand to benefit.”

At Genesee Regional Bank, Philip L. Pecora, president and CEO, likes what he’s seeing on a macroeconomic level and believes the chances of an economic soft landing — which Investopedia defines as “a cyclical slowdown in economic growth that ends without a period of outright recession” — is increasing.

“Credit quality from a banking perspective — and I think this is true across the industry — is very clean, which means people are paying their bills and companies are still growing, which speaks to [the country] approaching a soft landing,” Pecora said.

That is not to say there are no challenges. One notable one is the impact of interest rates on the residential housing market. Roughly three-quarters of American homeowners are locked into a mortgage rate of 5% or lower according to Realtor.com — creating less of an incentive to sell and take on a new mortgage at a higher rate.

“The housing market is still very restrictive,” Pecora said. “I think borrowers are in very good shape, but still there’s not a lot of housing inventory out there and a lot of that’s tied obviously to interest rates.”

This is creating business opportunities locally in areas such as multi-family housing, though, Pecora notes. Commercial real estate wise, he believes the country is starting to see some easing in the office sector.

“I would say from a macro perspective we’ve seen a lot of headlines lately of large companies having people come back to the office and that’s trickling through the real estate market,” Pecora said. “A lot of areas that were distressed in terms of office space are starting to look a little bit better.”

Overall, Pecora believes there is good reason for optimism on both a macroeconomic level and locally in the year ahead.

“I think people are still waiting to see what happens to some degree, but certainly I don’t feel the threats that I was feeling two years ago,” he said.

Tim Brown, Rochester regional director of Evans Bank, who also heads up the bank’s commercial lending team in Rochester, is hearing optimism from his client base that the economy seems to be headed in the right direction following recent interest rate cuts.

“There is overall optimism to the point that a few of our clients and increasing sales and marketing efforts,” Brown said.

He’s seeing particular optimism in the manufacturing sector.

“I recently attended the monthly meeting of the Rochester Technology and Manufacturing Association, and the attendees were very excited about the upcoming year,” Brown said. “To me, that’s a good indication of where things are headed because the manufacturers often lead the way.”

As far as the banking industry is concerned, Brown notes a lot of excitement at Evans Bancorp. about their upcoming merger with NBT Bancorp Inc., which is headquartered in Chenango County.

Under the deal, which is anticipated to be finalized in Q2 2025, Evans – headquartered in Erie County – will be rebranded as NBT. Once the merger is complete, the bank will have combined assets of roughly $16 billion.

“We’re very excited about expanding and the opportunities it will bring to the Rochester/Buffalo market,” Brown said.

Caurie Putnam is a Rochester-area freelance writer.