Should We Try to be Enthusiastic for 2023?

From the February 2023 ASA Monthly Economic Report: The latest PMI tracked a little lower than it was in December and sits at 47.4. This is not miserable as these are still numbers within reach of the expansion zone (readings above 50), but they are still dipping. The services data has been improving but the big issue for manufacturing is that many companies are sitting on too much inventory. They bought aggressively as they dealt with supply chain fears but now have too much and are not interested in adding to that total.

The monthly ASA Economic Report is produced by Armada Corporate Intelligence, ASA’s business intelligence partner, and is available as a free member benefit for ASA members. Find the report here.

Additionally, Armada noted that there have been more than a few gloomy prognostications regarding the start of 2023. There are charts in circulation that assert the first quarter will dip into negative territory but the latest estimates from the GDPNow system employed by the Atlanta Fed show a gain of 2.5% for Q1. This would be very consistent with the performance of the last half of last year (2.6% in Q3 and 2.9% in Q4). Growth rates in this range have been the norm for the US economy for the last 25 years.

The report also notes that there are still lots of questions regarding the Ukraine conflict and how it has deteriorated into a war of attrition and looks likely to last for years. The alliance against Russia has held but there are still many nations in the world who have been unwilling to apply pressure and that has allowed Russia to escape most of the sanction pressure. The drain on western economies has been severe but Russia is in much more serious economic distress.

Also in the Economic Report, ASA Chief Economist Dr. Chris Kuehl asked readers what are the real threats in 2023… He states, “Is there still a reason to assert that 2023 will feature a deep recession? Is the forecast now calling for nothing more drastic than a slowdown and a “soft landing”? Not to play the role of the dismal scientist, but there are three real threats to be aware of as the year progresses.”

Dr. Kuehl also answers one reader’s question “Could a changed immigration policy make a difference on worker shortages?”

Join ASA Chief Economist Dr. Chris Kuehl for the PHCP/PVF economic update podcast, Keeping it Real with Dr. Kuehl. This podcast is a free member benefit that drops each Friday during weeks that Dr. Kuehl does not do his live economic update webinar (usually the third Wednesday of the month). Listen here!