Today’s U.S. GDP Growth Rate estimate suggested a 1.5% contraction in the first quarter of the year, slightly below initial estimates of 1.4%.
So the big question remains, will the economy slip further in the second quarter, officially pushing us into a recession?
That seems to be the expectation:
Over 50% of Wall Street’s professionals think the Fed’s fight against inflation will lead to a recession. Eight out of ten small business owners believe the U.S. economy will enter a recession this year.
There has also been a significant uptick in companies citing a challenging macroeconomic environment as they cut costs, freeze hiring, and reduce forecasts.
Meanwhile, this week the Congressional Budget Office released upbeat estimates for the U.S. economy.
Here’s a CNBC summary of the CBO’s expectations for the U.S. economy through 2024:
- Real GDP: 3.1% in 2022, 2.2% in 2023, and 1.5% in 2024.
- Inflation (measured by CPI): 4.7% in 2022, 2.7% in 2023 and 2.3% in 2024.
- Unemployment rate: 3.7% in 2022, 3.6% in 2023 and 3.8% in 2024.
- Federal funds rate: 1.9% in 2022, and 2.6% in 2023.
They note that inflation will remain above the Fed’s 2% target through 2024, but price increases will not sustain their current pace.
The positive tone suggests the CBO thinks the Fed’s plan outlined in yesterday’s minutes will be able to orchestrate a soft landing. 🛬
Whether today’s rally is the market buying into that theory or if this is just a relief rally remains unclear. ❓
What is clear is that the two main concerns on everyone’s minds as we head into the slow summer trading season are inflation and a potential recession. 😰