Page 9 - ISQ UK_October 2017

JANUARY 2022

2022 US Economic Outlook: Turbulence Ahead

Scott J. Brown, PhD, Chief Economist, Raymond James

The US economy experienced a number of surprises in
2021, some good, some bad. The outlook for the coming GDP growth should be slower, but still beyond a
year is likely to be even more volatile with inflation and Fed- long-term sustainable pace. GDP growth will be
eral Reserve (Fed) policy as the major factors. Higher ~3.5% in 2022.
inflation in the spring of 2021 was narrow and expected to
be transitory, but by the end of the year there were growing
fears of a more persistent, broader increase in inflation. takes (many economists believed the 2009 stimulus was not
enough to offset the damage of the 2008 financial crisis). The $1.9
With that, financial markets expect tighter monetary policy
trillion American Rescue Plan Act of 2021 followed $3.2 trillion in
and a possible policy mistake. Time will tell, as they say, but stimulus passed in 2020 and helped propel strong growth in the
investors should be prepared for the ground to shift repeat- first half of the year. Vaccines arrived earlier than anticipated,
edly in 2022. which helped the economy to reopen more rapidly.

Abraham Lincoln wrote, “If we could first know where we are, and GDP, SUPPLY CHAINS, & INFLATION
whither we are tending, we could then better judge what to do, and Real gross domestic product (GDP) rose at a 6.5% annual rate over
how to do it.” We began 2021 with expectations of a fiscal policy the first two quarters, but that understates the economy’s strength
contraction (less support than in 2020). Democrats could gain con- (as lower inventories and a wider trade deficit subtracted from the
trol of the Senate if they won two Senatorial run-off elections in headline growth figure). For the key components of GDP, con-
Georgia, which seemed unlikely. Yet, it happened. Still, the passage sumer spending rose at an 11.7% annual rate in the first half, while
of a massive fiscal stimulus package would be difficult. With narrow business fixed investment advanced 11.1%.
majorities in the House and Senate, moderate Democrats would
likely baulk at adding so much to the federal debt. However, the The arrival of the Delta variant, which was more transmissible
incoming administration was determined not to repeat past mis- than the original virus, combined with a large fraction of the pop-

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