January 27, 2023

Hi, everyone! I’m Alan Beaulieu from ITR Economics. I trust you’re having a great day. I am because GDP came out for the fourth quarter of 2022 and it’s very encouraging news! Now, most of you know that we don’t take just GDP. We use a constant dollar GDP so it eliminates all the impact of inflation. Because if you have inflation pushing up the number, it gives you a false sense of greatness. And if you have deflation or disinflation impacting the number, it can also make you wonder what’s really going on. When you deflate it in constant dollars, then you know exactly what’s going on. And the fourth quarter GDP came in above the third quarter number. Third quarter is at a record high, so obviously we’re still at a record high growth in GDP. About $20.2 trillion is very nice.

The September to December increase in the GDP three-month moving average was typical, 0.7%. Typical is 0.72%. It doesn’t get any closer than that, so everything’s moving according to plan. And when I compared the actual result back to our forecast we did with data available through June 2021, we have an amazingly close number adjusted for the change because there’s always a data adjustment that occurs when you adjust for that. We still have well over a 98% accuracy rating from a forecast using data through June 2021. Now most of you know that we have a new forecast in place for GDP. That forecast came out with data available through September of 2022, just a quarter ago. And that was caused by the increase in interest rates … let’s say a dramatic increase in interest rates … over a relatively short period of time by the Federal Reserve Board, and the impact that’s going to have on the economy when we get to later this year, especially, and in 2024.

This fourth quarter data, it says that if you’re feeling good about the economy, you have a right to. Doesn’t change the fact, though, that the rate of growth in 2023 is going to slow. The rate of growth is going to slow more noticeably later this year. 2023 will come in above 2022, but not at the same pace as we’ve enjoyed in the past year. We’re going to find that that turns into a first quarter decline in the GDP three-month moving average, second quarter 2024 rise, third quarter a little slippage again, fourth quarter 2024 a little rise, with the year overall ending essentially flat with 2023. Now, for some that’ll be a non-issue. And for others, it’ll be a noticeable change in the trajectory of your business. And for others, it means that there will be a recession in your business or a decline in revenue. It all depends on how you fit into the economy.

Industrial production is what most of you listening to my voice relate to, and we are looking at a mild recession beginning late in 2023 till late ’24. And the industrial production 12-month moving average: 2.7% peak to trough decline, slightly milder than normal. Okay. Why am I telling you this? Because it’s going to be all kinds of news out there. Fourth quarter number this, it must mean that. Fourth quarter number was good. Fourth quarter number plus jobs means that there’s no worries. I just want you to be aware of the fact that it is a good number. Very happy [inaudible 00:03:31].

Very happy to see so many businesses doing well, but don’t let happiness find its way into your projection planning. Know how you relate to the economy. Know what it means so that you can plan accurately for your markets and, more importantly, for your company so that you can position yourself cash-wise, message-wise, capitalization-wise. Any way that you can think of it, knowing that that macro deceleration coming and its likely impact on you. Thank you for joining me today. I’m Alan. ITR Economics. Talk to you soon, I hope.