US: Economy is seen expanding 1.6% in 2022 – UOB
|Senior Economist at UOB Group Alvin Liew reviews the recent flash US GDP figures for the third quarter.
Key Takeaways
“The advance estimate of US 3Q GDP surprised on the upside with a 2.6% q/q SAAR expansion (versus Bloomberg est +2.4%) the first positive q/q print for this year, from an unchanged 0.6% decline in 2Q. The rebound in 3Q GDP was attributed to resilient private consumption expenditure, a continued gain in net exports, a rebound in non-residential fixed investment (business spending) as well as federal government, state and local government spending, offsetting the continued decrease in private inventories and a deeper plunge in residential fixed investment.”
“But with the 2.6% bounce in 3Q growth, even as we factor in a sizeable 3.6% contraction in 4Q, our full year GDP growth forecast will now be higher at 1.6% (from previous forecast of 1.0%). And for 2023, we continue to expect the US economy to fall into a shallow recession due to the combination of elevated inflation, global growth slowdown with a European recession and importantly, the impact from the aggressive Fed rate hikes. We keep our projection for US GDP to contract by 0.5% in 2023. That said, the risk of a deeper recession will rise in tandem with a more protracted and sharper Fed tightening cycle.”
“US GDP Outlook – The latest GDP report does not change our Nov FOMC outlook for a 75 bps rate hike. If anything, the resilient PCE component and rebound in business spending in 3Q vindicates the Fed to continue with “larger than usual” hikes in order to tame elevated inflation. The question is whether the more pessimistic outlook in 2023 will be enough to convince the Fed to slow its tightening pace after Nov.”
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