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'Has Your Outlook for 2023 Changed?'

By Jackie Greene on December 15, 2022

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Jackie Greene

Jackie is the Vice President of Economics at ITR Economics, and oversees forecasting and applied research.

One of the most frequent questions we are getting lately is “Has your outlook for 2023 changed?” The answer: yes and no.

What hasn’t changed:

  1. We continue to expect US single-family housing starts to be in recession in 2023.
  2. We continue to expect US GDP will grow in 2023.
  3. We continue to expect US Industrial Production will generally be in Phase C, Slowing Growth, for the majority of 2023.

However, there is a significant change to the waning months of 2023 and to our expectations for 2024. The Federal Reserve’s aggressive rise in interest rates and the resulting inverse yield curve have led us to pull in the recession previously projected for 2025/2026. The recession is now projected to begin in late 2023 and persist throughout 2024 for US Industrial Production (12MMA basis)

[ Further Reading: "Frequently Asked Questions About Rates-of-Change ]

The good news is that the recession will be relatively mild. Onshoring trends and ongoing foreign investment into the US will mitigate some of the typical downside pressures on the industrial economy. Another noteworthy difference this cycle that will help keep the recession mild is that we expect the labor market to remain relatively tight compared to prior recessions. There are roughly two job openings for every unemployed person in the US. We are not likely to see that ratio reverse to a negative number during the next two years, which will keep upside pressure on wages and indicates consumers will have the ability to continue spending, even if the pace is not as robust as in the prior years.

Ensure you know how your business fits into the economy so you can determine how severely the upcoming recession will impact your business.

For more about the changes to our 2024 outlook, watch Brian and Alan Beaulieu’s latest presentation.

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