Lowering GDP Estimate (Again) for 2022

Based on our review of the latest economic fundamentals, our forecast for GDP growth in 2022 is now 0.7%, down from our prior forecast of 1.4%. Our preliminary forecast for 2023 is now 1.8%, down from 1.9%, assuming economic trends start to recover later next year. Our forecasts do not call for a recession, despite the negative 1H22 results. But they do call for below-trend GDP growth due largely to the impact on the economy of higher interest rates. The domestic employment environment is nearing full strength, although consumer confidence trends are mixed. Auto sales have recovered from pandemic lows, but at an uneven pace. The U.S. housing market has been a positive contributer to the economic recovery from the pandemic, but high prices are cooling the market. Businesses are expanding, but growth is slowing. Exports are under pressure from geopolitical tensions and the rising dollar. But import growth will not proceed at the recent high teens pace. And government spending trends should smooth out as well. Our estimates differ a bit from consensus. The Federal Reserve is anticipating GDP growth of 1.7% for 2022, while the IMF is calling for growth of 2.3%. The Philadelphia Federal Reserve's Survey of Professional Forecasters is calling for growth of 2.5%. The GDPNow forecast from the Federal Reserve Bank of Atlanta is 1.3% for 3Q22.