The economy is proving stronger and more resilient in the face of continued high inflation, rising interest rates and low consumer sentiment, according to the U.S. Chamber of Commerce’s March Current Economic Conditions report.
The economy grew by 2.1 percent in 2022 and is expected to grow another 1.4 percent in Q1 2023, the report found. However, there remains a 65 percent chance of a mild recession in mid-2023 and the Chamber is forecasting a 0.8 percent decline in Q2 and a 0.5 percent decline in Q3, before returning to growth (0.3 percent) by the end of the year.
“If there is to be a recession this year, it has been pushed back later than anticipated,” said Curtis Dubay, chief economist for the U.S. Chamber.
Inflation remains a significant drag on the economy. Food-at-home prices rose 10.1 percent year-over-year in February and inflation is outpacing wage increases 6 percent to 4.6 percent. Still, the rate of inflation is trending down from a height of 9.1 percent in mid-2022, albeit slowly.
With the Federal Reserve increasing interest rates rapidly in 2022 to curb inflation, borrowing costs for businesses rose throughout most of 2022. The average AAA corporate bond rate topped 5.3 percent last fall, but those rates appear to be settling now and were down to about 4.6 percent in March.
One possible reason why the economy has not recessed yet is the continued strength of the job market. There were 5.7 million unemployed people for 10.8 million job openings at the end of January. That imbalance can no longer be explained simply by people sitting out of the job market for COVID reasons, as the labor force is now around 166 million people, securely above the pre-pandemic February 2022 level. Despite this, the Chamber found that the country was still missing about 2.46 million workers.
The full report is available here.