Soft landing or recession? This debate obsesses the United States as the year 2022 ended on an extremely positive note. Growth reached an annual rate of 2.9% in the fourth quarter, according to figures published Thursday, January 26 by the Bureau of Economic Analysis. Over the year 2022, it stands at 2.1%, the slight contraction in the first half having been overcome. The country is returning to a natural growth rate, after the 2.8% recession due to Covid-19 in 2020 and the 5.7% rebound (revised to 5.9%) in 2021. This growth was driven almost exclusively through consumption in services.
On the employment side, all is well too, with an unemployment rate falling in December to 3.5%, its lowest level for half a century. Finally, on the inflation front, the subject seems overcome. Admittedly, in December, nominal inflation was still 6.5% over one year. But month-on-month, prices fell 0.1% in December, while price increases over the last three months of 2022 fell to 1.8%.
Nobel laureate in economics Paul Krugman is surprised to find that many think ” that inflation is still unleashed. The public has not taken notice of the great deceleration in the second half of 2022.” He estimates that “too many news articles focus on year-over-year inflation and miss the big turning point” while today’s numbers “still reflect rent increases from a year ago.” Economists are already on the move afterwards, such as Olivier Blanchard, former chief economist of the IMF, who once again foresees the return of the “secular stagnation”made up of low interest rates, insufficient investment and weak growth.
Serious cooling in December
At term cost, the concern relates to the possible economic slowdown, while the Federal Reserve raised its rates from zero to 4.25% in 2022 and should, according to the markets, increase them again by 0.25 points during its next meeting on 1is february. But isn’t it time to turn the tide, when 60% of economists polled by the Wall Street Journal predict a recession and that the Fed’s monetary policy takes many months to diffuse through the economy.
December initially showed a serious cooling in the appetite of consumers, who reduced their spending by 1.1%, after an initial drop of 1% in November. Then, the real estate crisis makes itself felt, with a 10% drop in residential investment in 2022. Finally, companies are waiting, with a deceleration in investment, which only grew by 3.7% in the last quarter against 10% in the first half. IT investment is even declining.
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