0ctober 17, 2022

By Harris L. Kempner, Jr., President


At this writing, the U.S. economy is an amazingly mixed bag. Some areas are thriving, and other areas are having a very tough time. This has set up a bifurcation in expected growth that we feel will be tilted enough toward growth to avoid a recession in 2022. However, evidence is growing, in our opinion, that we shall likely see a recession in early- or mid-2023.


Here are some of the weaknesses:


  1. Housing was extraordinarily overbuilt in 2021 and pricing also was extremely strong historically. At this point however, the starts are down 23% from February to August, prices have tumbled, and the trend is worsening. We expect this to continue and be a serious weight on the considerable part of the economy that is housing related.

  2. Auto demand has been hit by increasing costs of material and increased loan costs which is reducing sales appreciably.

  3. From the Fed point of view, inflation is not slowing so interest rates are due to increase at a minimum of 100 basis points over the next several months, which will exacerbate these trends.


In addition, weaknesses in Europe and Great Britain are likely to spill over to us, and there is the matter of the war in Ukraine straining commodity prices at one level or another.

The above is a substantial compendium of weak spots but there are certain areas of solid growth.

The American consumer, which is roughly 70% of the U.S. economy overall, has been very strong. Retail sales, according to MasterCard analysis, were up 10% in year-on-year September 2022 and spending on service areas like travels and restaurants were up 20% from the same time last year.

Government spending is increasing a bit as a solid base. Further, demand for commercial and individual loans have been increasing. Some of this latter is good news because business is increasing; some of it is bad news because of an involuntary inventory build-up, but the good news portion seems to us to be outweighing the bad here for the time being.

So, the bifurcation referred to above.

On balance though, we feel that the weak areas will be getting even more weak, the strong areas will diminish, and this combination will be enough to lead to a shallow recession in mid-2023. We presently expect to be pulling out of it by 2023’s year-end.


All content is for information /educational purposes only and should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services or securities. It is also not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Purchases and sales discussed are subject to suitability which requires a review of an investor’s objective, risk tolerance, and time horizons. Investing always involves risk and possible loss of capital.