Economic Update | December 2022

As the year winds down, let’s take one last look at the numbers with Ginger Chambless, Head of Research for JPMorgan Chase Commercial Banking. She also shares a few thoughts on what may come in the new year.

For more insights and a comprehensive view into our 2023 outlook, check out our weekly Economic and Market Update.?

Economics and markets: A mild recession could set in by late 2023

We expect economic growth to decelerate further in 2023 to a below-average pace. Our view incorporates a mild recession beginning in 4Q23, as higher interest rates slow demand broadly.

Federal Reserve: The Fed is aggressively raising rates to combat inflation

The Federal Reserve is on track to raise rates a historic 475 basis points, bringing the upper bound of the Fed Funds rate to a “restrictive” 5% by early next year.

Labor: May begin to soften later next year amid a slowing economy

A slower growth environment should cool demand for workers and cause the unemployment rate to drift up to 4-4.5% by the end of 2023. This is still quite low by historical standards.

Inflation: Several components show signs of moderation

Inflation appears to be slowing as supply chains unwind, inventory improves and consumer spending shifts. We see headline inflation cooling from 7% at the end of 2022 to 3-4% at the end of 2023.

Commodities: The outlook for metals prices largely tracks with the global economy

Slower China growth in 2022 and concerns of a global slowdown in 2023 have led most metals prices lower year to date.

Supply chain: Bottlenecks ease on the path back to normal

Bottleneck pressures are quickly improving with declining commodity prices, lower transportation costs and shorter delivery times. This translates to inventory replenishment in many goods categories.

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