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US Economy Ends 2022 on Mixed Note

The U.S. economy grew faster than initially thought in Q3 at 3.2% year over year, up from the 2.9% estimate—sparking fears that the Fed could raise interest rates more than expected in 2023. However, "The final GDP report is one of most backward-looking readings the government releases, looking at the state of the economy nearly three months ago," reads an article from CNN. "The current forecast from economists is that growth in the current period will be only 2.4%, significantly slower than Thursday's reading."

Consumer sentiment is up, the job market is still hot and economic growth continues. But despite continued strong GDP, other economic factors are deteriorating. For example, the housing market has taken a massive hit from the sharp rise in interest rates. "Since peaking last December, building permits have dropped by 29%, suggesting that housing starts, which are down by 21% since April, have further to fall," according to Wells Fargo. "This expectation seems to be shared by home builders as the NAHB index declined for the 12th consecutive month in December. The NAHB index, which measures sentiment among builders, has essentially retreated to its recent low in April 2020 when the economy was more or less in free fall."

Many economists still expect a recession come 2023, if the economy is not already in one. NACM Economist Amy Crews Cutts, Ph.D., CBE, forecasts a recession in Q1 of 2023 as we enter turbulent times. "Each recession is new and different in its own way and the causes are new and different in their own way," Cutts said during a recent episode of Extra Credit.  "[Credit Managers' Index] respondents have indicated for last eight months that conditions are deteriorating so much that now the CMI is at its worst level outside of a recession."

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Thursday, 02 February 2023

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