Our chart of the week above shows that the US economy faced a contraction in the first half of 2022 as GDP (green bars) declined in the first and second quarters, leading to concerns about a potential recession.
However, as the gold bars reveal, consumer spending—which accounts for roughly 70% of GDP—stayed healthy. Consumers continued to shell out cash despite rising interest rates and prices, and personal consumption expenditures stayed well above zero.
Sure enough, the revised third-quarter GDP data indicates that the economy saw a strong rebound in the second half of the year. Low unemployment and an undeterred consumer are inconsistent with a 2022 recession.
Nevertheless, the economy could still face challenges in 2023 due to the impact of the Federal Reserve’s tightening policy. To gauge the severity of a potential recession, it will be important to monitor consumer spending, as it is a key factor in determining the strength of the economy.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.