This Week's State Of The Economy - What Is Ahead? - 30 September 2022

By: Taro Chellaram /Wells Fargo Economics & Financial Report/Oct 03, 2022

This Week's State Of The Economy - What Is Ahead? - 30 September 2022

Incoming economic data demonstrate that while the economy is losing momentum, activity remains resilient. Consumer confidence rose to the highest level in six months in September, and stripping out some volatility in new orders for durable goods revealed stabilization in demand and strength in Q3 equipment spending. The third release of second-quarter GDP growth also included revisions that put the economy in a stronger position coming out of the pandemic-induced recession than previously thought. Consumer spending in particular has been unwavering, with real personal spending rising 0.1% in August.

With little indication that households have lost their staying power, we have adjusted our forecast. The current resilience in economic activity does not dismiss an eventual recession, but it does make it less likely that a recession will start by the beginning of next year. Near-term strength also means more monetary tightening will likely be necessary to slow growth sufficiently enough to quell elevated inflation. As we detail in this week's Interest Rate Watch, we now project the FOMC to hike its federal funds rate by an additional 125 bps this year and another 50 bps at the start of next year, which would bring the target range of the federal funds rate to 4.75%-5.00% by March (chart).

Importantly, we still see the economy falling into a mild recession next year, but we now expect it to take place slightly later, beginning in the second rather than first quarter, as the lagged effects of monetary policy begin to bite more meaningfully into consumption and weigh on the ability of firms to hire. An important consideration is that the economic trade off for growth today is the potential for a worse hit to households later. Consumers have increasingly relied on their balance sheets to spend with wage gains not keeping pace with inflation. The longer that lasts, the larger the deterioration in household finances. For this reason, we are now looking for a slightly larger decline in real personal consumption expenditures in our latest projections with a peak-to-trough decline of 1.0% compared to 0.6% previously




This Week's State Of The Economy - What Is Ahead? - 30 April 2021

The gain in output leaves the level of real GDP just a stone\'s throw below its pre-COVID Q4-2019 level (see chart).

2021 Annual Economic Outlook

The longest U.S. economic expansion since the end of the Second World War came to an abrupt end earlier this year as the COVID pandemic essentially shut down the economy.

This Week's State Of The Economy - What Is Ahead? - 18 November 2022

The resiliency of the U.S. consumer was also on display, as total retail sales increased a stronger-than-expected 1.3% in October, boosted, in part, by a 1.3% jump in motor vehicles & parts and a 4.1% rise at gasoline stations.

This Week's State Of The Economy - What Is Ahead? - 12 August 2020

The consumer has been a bright spot in the recovery so far, but with jobless benefits in flux and no clear path for the long-awaited stimulus bill, the support here could fade.

This Week's State Of The Economy - What Is Ahead? - 11 September 2020

In the holiday-shortened week, analysts’ attention remained on the progress of the labor market. Recent jobless claims data remain stubbornly high and point to a slowing jobs rebound.

This Week's State Of The Economy - What Is Ahead? - 25 March 2022

The fact that capital goods shipments surprised on the upside was one of the few things that went right in this week\'s durable goods report.

This Week's State Of The Economy - What Is Ahead? - 16 October 2021

The first economic data released this week in the United States reinforced the theme that labor supply and demand are struggling to come into balance.

This Week's State Of The Economy - What Is Ahead? - 27 November 2019

A series of U.K. general election polls released this week continue to show Boris Johnson’s Conservative Party with a significant lead over the opposition Labor Party.

This Week's State Of The Economy - What Is Ahead? - 31 January 2020

Mexico’s economy has slowed notably over the last year, with the economy contracting again in Q4, indicating a full-year contraction for 2019.

This Week's State Of The Economy - What Is Ahead? - 12 February 2021

Market attention was concentrated on the January consumer price data, as inflation has come back into focus.


Instagram

@ tcgcrealestate

Subscribe Now! IT's Free

Stay up to date with all news coming straight in your mailbox.

Copyright © 2024 TC Global Commercial. All rights reserved.