2022 GDP SECTOR ANALYSIS

The chart to the left presents the projected contributions of each major economic sector to North Carolina’s Gross Domestic Product (GDP). The real (inflation-adjusted) growth rate for 2022 is forecast to increase by 3.7 percent. Projected real growth rates for each sector (displayed in black type) are plotted on the horizontal axis. Projected percentages of GDP contributed by each sector (displayed in green type) are plotted on the vertical axis. The resulting rectangles show the expected weighted importance of each sector’s growth during 2022. All of the sector information presented in the table to the left is based on the new North American Industry Classification System (NAICS) definitions.

Ten of the state’s 15 economic sectors are expected to experience output increases during 2022. The sectors with the strongest expected growth rates are mining with a real increase of 32.5 percent, agriculture with a real increase of 26.7 percent, information with a real increase of 13.0 percent, business and professional services with a real increase of 12.0 percent, hospitality and leisure services with a real increase of 9.3 percent, government with a real increase of 7.9 percent, education and health services with a real increase of 6.2 percent, and other services with a real increase of 4.9 percent.

Two sectors are expected to experience real output increase but at levels below the overall GDP increase of 3.7 percent. These sectors are transportation, warehousing, and utilities (TWU) with a real increase of 3.5 percent; and wholesale trade with a real increase of 0.8 percent.

Five sectors are expected to decline in 2022, these sectors are finance, insurance, and real estate (FIRE) with a decrease of 0.3 percent; retail trade with a decrease of 1.4 percent; nondurable goods manufacturing with a decrease of 2.0 percent; durable goods manufacturing with a decrease of 4.5 percent; and construction with decrease of 9.0 percent.

2023 Gdp

Gross Domestic Product (GDP) is forecast to reach a level of $769,285.7 million in 2023. Real (inflation-adjusted) GDP is expected to increase by 1.6 percent over the 2022 level. This growth in 2023 will represent the third full year of growth since COVID-19.

For 2023, first quarter GDP is expected to increase by an annualized real rate of 0.6 percent. During the second quarter, GDP is expected to increase by an annualized real rate of 1.5 percent. In the third quarter, GDP is expected to increase by an annualized real rate of 1.8 percent. In the fourth quarter of 2023, GDP is expected to increase by an annualized real rate of 2.9 percent.

2023 Highlights

The big question in 2023 is, “will the U.S. economy slip into a recession?”

The answer is clearly uncertain at this time. During the first and second quarters of 2022 U.S. GDP declined and may suggest that is an indication that the U.S. economy is in recession. However, the two quarter decline in real GDP is only a rule of thumb. It is neither necessary or sufficient in indicating that we are in recession. While GDP declined in the first half of 2022, we also saw tremendous strength in the labor market. For 2022, the U.S. economy added 4,814,000 net jobs and North Carolina added 190,300 jobs.

So are we in for a recession in 2023? That depends almost entirely on what the Federal Reserve does during the first half of 2023. The Fed Funds Rate target is currently between 4.50 and 4.75 percent. However, inflation is running at over 6.0 percent year over year. This means real interest rates are still negative. However, recent trouble in the financial sector (the failure of Silicon National Bank) has brought into question future interest rate hikes. In the short term the Fed is going to have to balance the need to increase interest rates to fight inflation with the increased risk to the financial sector associated with higher interest rates. For now, the Fed has stemmed systemic risk by creating a lending facility that effectively insures all banking deposits. However, that action is in essence quantitative easing and is fighting against the Fed’s inflation fight. As a result, the net impact on the overall economy is quite uncertain at this time.