Growth, Inflation & Policy
As of January 3, 2023
INFLATION AND GDP
- Despite inflation starting to slowly tick lower over the last quarter, the probability of the U.S. heading into a recession in the next 12 months has become almost certain. Bloomberg’s recession probability model has correctly predicted a recession within 12-months every time the series has hit 100% (it’s current reading).
- Going into 2023, GDP growth in the United States is expected to be muted for the first half of the year. This adds to the consensus that the U.S. will enter a mild recession this year.
MANUFACTURING AND SERVICES
- In December, the Manufacturing PMI registered at 48.6, thus marking the first contraction in the sector following 30 consecutive months of expansion. Any PMI reading below 50 points signals contraction in the sector.
- Despite this, employment in the manufacturing sector is still showing signs of growth, increasing to 51.4 and rising above the contraction line for the first time since September.
- The ISM Services PMI also registered just under 50 in December, marking an overall contraction in the economy. This 6.9-point drop from the November reading was largely driven by a decline in New Orders.
- With both the ISM Manufacturing and the ISM Services Indexes registering below 50 points, it signals that these sectors are now in contraction. This will be the first time since 1981 that the Federal Reserve continues to hike interest rates into a contraction.
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