The United States should end 2022 with a quarter of growth, as Americans have continued to consume despite rising interest rates and inflation. But the question now is whether or not the world’s largest economy will experience a recession in 2023.
The gross domestic product (GDP) of the United States in the fourth quarter will be published Thursday at 1:30 p.m. GMT. Some economists expect slower growth, at 2.8% against 3.2% the previous quarter, according to Marketwatch consensus. But others are more optimistssuch as the Atlanta branch of the American central bank (Fed), which anticipates even stronger growth than in the third quarter, of 3.5%.
Consumption, the engine of the American economy, has indeed remained solid during the last three months of 2022. Despite the sticks that the Fed had put in its way, hoping to slow down far too high inflation. Indeed, while Americans rely heavily on credit for purchases, including daily, the institution wants to discourage them from borrowing too much money. For this, it raises its key rate, which pushes commercial banks to increase the interest rates of the loans they grant to their customers.
“Weaknesses”
“The end of the fourth quarter is a period in which we saw economic weaknesses”told AFP Gregory Daco, chief economist for EY Parthenon, citing in particular retail sales and industrial production, with “an environment in which the labor market, which is relatively solid, is weakening”.
Consumers already saw their purchasing power eroded by inflation. They also had to deal with rate hikes. And business leaders are walking on eggshells, as the forecasts are so uncertain. But they have had so much trouble recruiting for almost two years that they prefer to keep their employees, despite the uncertaintiesrather than dismissal.
And for 2023, growth or recession?
“The US economy will suffer a mild recession in 2023driven by the Fed’s tight monetary policy and tighter financial conditions,” said Ryan Sweet, chief economist for Oxford Economics, in a note, seeing the economy shrink in the second quarter. “For the moment, the economic indicators point rather to a recession, which would have started at the turn of the year, December-January”with perhaps even the destruction of jobs from the month of January, underlines for his part Gregory Daco.
But, he nuances, even if the unemployment rate – from 3.5% in December – increases a little, it could remain below 4%, “which is historically low”. “That’s the unique feature of this cycle.” “It’s a game-changer since it’s the key element that supports consumption“, itself “pillar of the American economy”, he adds.
The labor market as a bulwark
This is, moreover, what leads other economists to rely on continuous growth. “The main bulwark that everyone points to is the work market“, which, added to the savings accumulated by households during the pandemic, allows them to continue to consume, underlines Matt Colyar, economist for Moody’s. However, he expects such weak growth “that it will be necessary to squint to say whether it is a recession or not”, around 1% for the year.
The United States had returned to growth in the third quarter, after two quarters of decline in GDP: -1.6% in the first quarter, then -0.6% in the second. Without however falling into recession at this stageaccording to the administration of Joe Biden, and many economists, because of the solidity, in particular, of the job market.
Only one organization is authorized in the United States to officially determine the periods of recession: the National Bureau of Economic Research (NBER). But his announcements are published with months of delay.
The gross domestic product (GDP) of the United States in the fourth quarter will be published Thursday at 1:30 p.m. GMT. Some economists expect growth to slow to 2.8% from 3.2% in the previous quarter, according to Marketwatch consensus. But others are more optimistic, such as the Atlanta branch of the American central bank (Fed), which anticipates even stronger growth than in the third quarter, of 3.5%. American economy, indeed remained solid during the last three months of the year 2022. In spite of the sticks that the Fed had put in its wheels, thus hoping to slow down inflation that is far too high. Indeed, while Americans largely use credit for their purchases, including daily items, the institution wants to discourage them from borrowing too much money. To do this, it is raising its key rate, which is prompting commercial banks to increase the interest rates on the loans they grant to their customers.”Weaknesses” “The end of the fourth quarter is a period in which we have seen weaknesses at the economic level,” Gregory Daco, chief economist for EY Parthenon, told AFP, citing retail sales and industrial production in particular, with “an environment in which the job market, which is relatively solid, is in weakening.” Consumers were already seeing their purchasing power eroded by inflation. They also had to deal with rate hikes. And business leaders are walking on eggshells, as the forecasts are so uncertain. But they have had such difficulty recruiting for almost two years that they prefer to keep their employees, despite the uncertainties, rather than lay off. And for 2023, growth or recession? “The American economy will suffer a slight recession in 2023 , driven by the Fed’s tight monetary policy and tighter financial conditions,” said Ryan Sweet, chief economist for Oxford Economics, in a note, seeing the economy shrink in the second quarter. “For the moment, the economic indicators point rather to a recession, which would have started at the turn of the year, December-January”, with perhaps even job destruction from January, underlines for his part Gregory Daco.Mais, he nuances, even if the unemployment rate – from 3.5% in December – increases a little, it could remain below 4%, “which is historically low”. “That’s the unique feature of this cycle.” “It changes the situation since it is the key element that supports consumption”, itself “pillar of the American economy”, he adds. leads other economists to expect continued growth. “The main bulwark that everyone points to is the labor market”, which, added to the savings accumulated by households during the pandemic, allows them to continue to consume, underlines Matt Colyar, economist for Moody’s. However, he is counting on growth so weak “that you will have to squint to say whether it is a recession or not”, around 1% for the year. The United States had returned to growth in the third quarter, after two quarters of decline in GDP: -1.6% in the first quarter, then -0.6% in the second. Without falling into recession at this stage, however, according to the administration of Joe Biden, and many economists, due to the solidity, in particular, of the job market. Only one organization is authorized in the United States to officially determine times of recession: the National Bureau of Economic Research (NBER). But his announcements are published with months of delay.
