2023 GDP

Gross Domestic Product (GDP) is forecast to reach a level of $771,512.4 million in 2023. Real (inflation-adjusted) GDP is expected to increase by 1.4 percent over the 2022 level. This growth in 2023 will represent the third full year of growth since COVID-19.

For 2023, first quarter GDP is expected to increase by an annualized real rate of 0.8 percent. During the second quarter, GDP is expected to increase by an annualized real rate of 0.9 percent. In the third quarter, GDP is expected to decrease by an annualized real rate of 0.3 percent. In the fourth quarter of 2023, GDP is expected to increase by an annualized real rate of 1.8 percent.

2023 Highlights

The big question in 2023 is, “will the U.S. economy slip into a recession?” The answer is clearly uncertain, but leaning toward yes at this time. During the first and second quarters of 2022 U.S. GDP declined and many suggest that the U.S. economy entered into a recession. However, the two quarter decline in real GDP is only a rule of thumb. It is neither necessary nor sufficient in indicating that we were in recession. While GDP declined in the first half of 2022, we also saw tremendous strength in the labor market. For 2022, the U.S. economy added 4,793,000 net jobs and North Carolina added 163,600 jobs.

So are we in for a recession in 2023? That depends almost entirely on what the Federal Reserve does during the summer. The Fed Funds Rate target is currently between 5.00 and 5.25 percent. The April CPI suggests that inflation is running at 4.9 percent year over year. This means real interest rates are right around zero. The FOMC meets again in June and they will receive the May CPI during their meeting. They may pause or they may raise once by 25 basis points. Either way, the recent trouble in the financial sector is slowing lending across all banks and helping the Fed in its inflation fight. However, the net impact of increasing interest rates and reduced bank lending is creating uncertainty about the direction the U.S. economy is heading over the next couple of quarters. It is quite possible we will see a mild slowdown during the second half of 2023.