This morning the third and final estimate of U.S. Gross Domestic Product (GDP) for the fourth quarter 2022 was released. GDP rose 2.6% quarter-over-quarter, modestly below the 2.7% increase of the prior estimate. One key downward revision was in consumer spending to +1.0%, down from the prior estimate of +1.4% and below the +2.3% reported for the third quarter 2022. Consumer spending has been a key driver sustaining the economy. Recall that retail sales rose in January 3.0%, a large surprise to the upside, and overall retail sales are anticipated to increase during the first quarter 2023.
This week The Conference Board released the results of its Consumer Confidence survey for March. This survey acknowledges consumer attitudes, and consumer expectations for inflation, stock prices, and interest rates all believed to impact business conditions in the months ahead. This survey exhibited a slight increase to 104.2 during March, which was modestly above February’s reading of 103.4. Its Expectations Index, which reflects consumers’ short-term outlook for income, business, and labor market conditions, also increased to 73.0 from 70.4 in February. The Conference Board noted that “for 12 of the last 13 months—since February 2022—the Expectations Index has been below 80, the level which often signals a recession within the next year. The cutoff date for the survey was March 20, about 10 days after the bank failures in the United States.”
Initial unemployment claims continue to support a scenario of a sustained and strong employment situation. Claims for the week ending March 25, 2023, came in at 198,000, modestly above consensus expectations of 196,000. Year-to-date weekly claims have been below 200,000 except for the weeks ending on January 7, 2023 (206,000), and March 4, 2023 (212,000). Note that claims prior to the recessions of 2001 and the Great Financial Crisis (2008 – 2009) hovered above 350,000 and did not trend to current levels until after 2014.