Economic Update

Economic Update

The Post Pandemic economic surge should not have been unexpected (pardon the double negative). The demand which was suppressed during COVID has been unleashed. Supply and inventories which were curtailed were not prepared for the surge. As a result, prices rose along with inflation. GPD increased significantly by 9.2 percent, or $2.15 trillion, in 2022 to a level of $25.46 trillion, compared with an increase of 10.7 percent, or $2.25 trillion, in 2021. You might ask, isn’t this good? Actually no. Most of the increase was inflation driven When these numbers are adjusted for inflation they are reduced by 8 – 9%. A steady 2 – 4% growth in “real” GDP is healthy. To combat inflation the Fed has no choice but to take measures to limit the money supply by raising interest rates with the hopes that borrowing will decline. It’s a tricky game the Fed plays hoping to reign in inflation without creating a recession.