From the President's Desk Strategic Planning

Three Concerns for 2022

By Alan Beaulieu on December 29, 2021

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Alan Beaulieu

With a reputation as an accurate, straightforward economist, Alan Beaulieu has been delivering award-winning workshops and economic analysis seminars across the world to thousands of business executives for the last 30 years.

ITR’s forecast for 2022 is well known, but for the sake of clarity our macro forecast states that the US economy will grow through 2022 into 2023, but the rate of growth will decelerate as we traverse the year. The deceleration is likely to be more evident, and thus more widely recognized, in the second half of the year.

Concerns Exist

There are voiced concerns regarding the viability of ongoing growth in the US economy in 2022. Some have suggested that GDP, on a real (deflated) basis, may contract for a quarter or more next year. Our forecast calls for ongoing growth on a nominal basis and on a deflated basis. We are well aware of the concerns and will look at three of them.

1) Inflation

The Federal Reserve Board policies toward inflation, and the view that today’s 6.8% rate of inflation (a 39+ year high ) will persist through 2022, are top of mind for many people. The concern is that the Fed will have to rapidly increase interest rates to quell inflation and that this in turn will stall economic growth. This view is built upon an outlook of sustained inflation at today’s levels.

Our forecast calls for a temporary easing in the rate of inflation as we traverse 2022, particularly in the second half of the year. This outlook is supported by our economic theory, by key leading indicators, and by virtue of rate-of-change decline already occurring in key industries and in major global economies. A lessening in the slope of growth in demand while supply is increasing will ease the Producer Price Index and Consumer Price Index pressures, at least temporarily. This in turn will negate the necessity of a rapid, significant rise in interest rates. We are projecting that interest rates will go up in 2022 and in 2023, but at a measured pace that is consistent with our forecast.

2) Labor

Concerns over labor divide along two lines. The first is that the scarcity of labor will result in production and distribution slowdowns that will in turn lead to problems regarding the ability to satisfy consumer and business demand. This concern is compatible with our forecast of decelerating growth in 2022 (but not contraction) given the assumption that demand remains present.

The second concern regarding labor is found in wage rates and that a scarcity of labor, and underlying inflationary pressures, will lead to a relentless increase in wages that will become a problem for businesses in terms of profitability and in terms of fueling more inflation. The concerns over profitability are consistent with our forecast for 2022 (including our concerns surrounding ongoing growth in share prices); we think the issue of labor rates fueling more inflation is more of a longer-term factor than a short-term 2022 issue.

China Relations and Political Instability

Global economic problems would likely occur if tensions between China and the US escalate to where global trade is disrupted. Sanctions or trade disruptions in or out of China could spring from a variety of issues, including the environment, human rights, genocide, or suspected violations of WTO agreements . A potential worse-case scenario could find its cause in a China invasion of Taiwan and a protective US response . The disruption in chip shipments alone would be problematic. There is nothing we can do to hedge for this in our forecasts. This is a political risk that leads to economic troubles and as such is unforecastable. However, we will monitor the situation carefully and readers of our ITR Trends Report will be quickly apprised of our views and any forecast updates as they occur.


Be careful not to let these concerns lead to a paralysis of decision making or of strategic/tactical planning or implementation. Our forecast accuracy and method of looking at the world and its risks provides a solid basis from which business can move forward with confidence with minimal risk.


Alan Beaulieu

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