Monday, June 27, 2022

ACC survey of economic forecasters: mixed, but generally positive for 2023

Via the American Chemistry Council's Weekly Chemistry and Economic Trends report, this survey of economic forecasters: 
  • The outlook for 2022 continued to weaken with ongoing inflationary pressures, disruptions related to the  war in Ukraine, and aggressive tightening of monetary policy by the Federal Reserve.
  • Expectations into 2023 were also lower for many indicators compared to a month ago.
  • U.S. GDP is expected to grow by 2.6% in 2022 as the highest inflation in decades erodes spending and higher interest rates raise borrowing costs. In 2023, forecasters continue to expect the U.S. economy to grow by 1.8%, a pace below its long-term trend.
  • Consumer spending is expected to increase by 3.1% in 2022 before slowing further to a 1.7% gain in 2023.
  • Business fixed investment will be a larger contributor to GDP growth in 2022 with an expected 5.4% gain. In 2023, growth in business investment is expected to slow to a 3.1% Y/Y pace.
  • Industrial production is expected to rise 5.1% in 2022 (as manufacturing continues its momentum and oil & gas activity expands) and 1.9% in 2023.
  • With continued supply chain challenges for vehicle manufacturers, expectations for light vehicle sales were lowered again to 14.8 million in 2022 and rising to 16.1 million in 2023. 
  • Expectations for housing starts were the same compared to last month at 1.65 million in 2022 but lowered to 1.55 million in 2023. 
  • The unemployment rate is expected to average 3.6% in 2022 and 3.8% in 2023.
  • Inflation continues to accelerate through mid-year. Expectations for gains in consumer prices continued to grow compared to our mid-year outlook with forecasters looking for inflation of 7.6% in 2022, before easing to a 3.6% pace in 2023, as constraints ease. 
  • Compared to last month, expectations for interest rates (10-year Treasury) continued to move higher for 2022, as the Fed implements aggressive tightening. 
  • Following the Russian invasion of Ukraine and Covid lockdowns in China, forecasters have downgraded their expectations for the global economy. Global GDP is expected to rise by 3.2% in 2022 and 2023. Global industrial production, hampered by ongoing supply chain challenges in addition to the disruptions from Chinese lockdowns and the war in Ukraine, will rise 3.9% in 2022 and 3.6% in 2023.
  • In addition to ongoing supply chain challenges, slower growth in global GDP and industrial production will be reflected in softer projections for global trade. Following a 10.4% rebound in 2021, global trade volumes are expected to rise by 3.6% in 2022 and 3.2% in 2023, both lower than previously expected. 
According to this, there is no prediction for a "technical" recession for 2022 or 2023 (i.e. two consecutive quarters of negative GDP growth), this is broadly good news. Either way, I would continue to expect a slowing of hiring (i.e. less torrid than 2021), but still generally a good environment for job seekers. This will be important to watch, especially as the Fed continues to respond to inflation with additional (?) rate increases... 

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