A Slight Decline In U.S. GDP Is Expected
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Outlook for the global economy is gloomy. The economic outlook for 2023 will feel different depending on where you are in the world. The world's largest economy is also struggling, and some believe it may be facing a mild recession. There is evidence that the economy is improving, and the US may nevertheless avoid a major downturn.
GDP forecast
Since the beginning of the first half of last year with two consecutive quarters of negative GDP growth, the US economy has recorded a return to positive GDP growth in Q3 at the level of 3.2%. As we look at the first iteration of Q4 GDP this week, it seems quite likely that we will see a slowdown after the strong performance in Q3. A slight decline to 2.6% is expected, although given the signs of a slowdown in consumer spending in recent months, one would think that there could be a significant risk of lowering this estimate.
Source: investing.com
Steven Blitz opinion
According to TS Lombard's chief US economist, Steven Blitz, a recent US Federal Reserve survey of real economy companies found that the majority of respondents said they expect little or no growth in their order books and that they are already seeing the pace of growth prices in the real economy slow. He said economic activity was returning to normal levels that had previously been spurred by stimulus during the pandemic. In his opinion, at the same time as the impact of the stimulus wears off, the central bank raised interest rates, which should lower the level of aggregate demand in the economy.
Positive signs for the US economy
Positive signs include the declining Consumer Price Index (CPI), which fell for six consecutive months through December, signaling easing inflation. Then there is the job market, which remains strong.
Negative signals for the economy
Retail sales fell by 1.1% in December after a downward-adjusted fall of 1% in November. The drop was larger than expected and it was the biggest drop in 12 months. Autumn is really unsettling because we are talking about the pre-Christmas shopping season. However, sales have been reduced in part due to falling prices.
Industrial production also surprised negatively, falling by 0.7% in December. November saw a decline of 0.6% and was larger than expected. The decline was mainly due to industrial production, which fell by 1.3% in December and fell by 2.5% yoy in the fourth quarter. Higher interest rates and reduced purchasing power due to inflation hurt the demand for commodities.
Will the Fed slow down with rate hikes?
Disinflationary pressures and widespread signs of weakening demand may prompt the Fed to further decelerate the pace of interest rate hikes. That's what Philadelphia Fed chairman Patrick Harker suggested this week, saying he's "ready for the U.S. central bank to move to a slower pace of rate hikes amid some signs that hot inflation is fading away." Dallas Fed Chairman Lorie Logan expressed a similar view.
Source: investing.com
