overall macroeconomic conditions

By the time you read this, the Bureau of Economic Analysis (BEA) will have released its official estimate of Q4 GDP, but as of December 2022, early estimates were fairly bullish.

Bank of America and Goldman both forecast +1.4% q/q saar, while the Atlanta Fed’s GDPNow is even more optimistic in estimating +3.4% Q4 GDP growth. Recall that Q3 GDP came in at +2.6%.

Perhaps the biggest economic issue in 2022 was inflation— but, as it happens, inflation is in retreat.

Wrote economist Adam Blinder in the Wall Street Journal last month:

“Over the past five months (June to November 2022), inflation has slowed to a crawl. Whether measured by the consumer-price index, or CPI, which most people watch, or the price index for personal consumption expenditures, or PCE, which the Federal

Reserve prefers, the annualized inflation rate has been around 2.5% over these five months. “

Yes, you read that right. Yet hardly anyone has noticed this stunning development because of the near-universal concentration on price changes measured over 12-month periods, which are still 7.1% for CPI inflation and 5.5% for PCE inflation.

There are a few caveats, chief among them being that five months isn’t quite enough to declare victory, but also:

“Concentrate instead on ‘core’ inflation, which excludes food and energy prices, annual inflation over the past five months has run higher: a 4.7% annual rate for the CPI and 3.7% for the PCE.

So the Fed’s fight against inflation isn’t over.

Still, as we head into 2023, the industry is doing pretty well, and the economy as a whole is humming along. Can we keep it going?