Investors looking for signs of how strong or weak the economy actually is will get no better data point than what’s set to be released on Thursday morning. The U.S. Commerce Department will publish its initial gross domestic product figure for the fourth-quarter, which is expected to expand by a 2.6% annualized rate, slowing from the 3.2% pace recorded in Q3. Remember, that the U.S. already entered a technical recession in the first half of 2022, and many are quite worried that an actual recession could take place in 2023 – if the unemployment rate rises precipitously and the Fed isn’t able to pull off a soft landing.
Fragile or resilient? Data points have been all over the place in recent months, implying mixed signals about the economy and its various sectors. Retail sales have weakened and factory production has declined along with activity in the housing market. Other spending figures point to a strong consumer and slowing inflation, while the unemployment rate remains at record lows despite big layoffs in growth oriented sectors like technology.
“Industrial production has been down for three months and capacity utilization has been down for eight months, signs that a recession is either here or very near,” writes SA contributor John Mason. “The variables tend to be biased toward the ‘real’ part of economic output, not taking in things like services, but they still tend to capture movements in the economy that are a little bit ahead of the more general changes that most people look at.” See the entire Seeking Alpha article here.
Speaking of the economy: As the White House stares down a potential recession with limited fiscal options, President Biden is likely to highlight what the alternatives would be to his current economic policy. He’ll likely hone in on those today as he decries GOP proposals – like the national sales tax – in a speech to union workers in Virginia. When faced with recessions in the past, Democrats and Republicans have worked together on fiscal stimulus measures, like suspending the payroll tax or extending unemployment insurance, but that looks less likely this time around, especially as they spar over the debt ceiling.