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The U.S. economy did well in 2022, however, recession fears are growing

STEVE INSKEEP, HOST:

No matter where the U.S. economy goes this year, it seems to have had a running start. We learned this morning that the economy grew at a relatively rapid clip in the final months of 2022. NPR's Scott Horsley is here. Scott, good morning.

SCOTT HORSLEY, BYLINE: Good morning, Steve.

INSKEEP: So what have you learned?

HORSLEY: Well, we know that the economy shrank in the first six months of last year, but by late summer and early fall, it had really started to rebound. GDP grew at an annual pace of 2.9% in October, November and December. That's only a little bit slower than the three months before. All in all, it looks like the economy managed to stay afloat last year, despite all the challenges posed by the war in Ukraine and the lingering effects of the pandemic. Consumers kept spending, even if they had to dip into savings or use their credit cards to keep up with rising prices. But forecasters do think that's going to slow down. People like Nikki Moore, a married mother of two in Florida, are starting to get a little more cautious with their spending as money gets tight.

NIKKI MOORE: Everyday stuff is just costing more. We enjoy going to the movies, but, like, the four of us going to the movies - we're just talking nothing super, not 3D, just the four of us for tickets and concessions - that's, like, a hundred dollars just for a movie night.

HORSLEY: Last year, Moore and her husband splurged on a 10th anniversary trip to Canada. But looking ahead to her son's upcoming spring break, she's planning to stay closer to home. Maybe, she says, they'll just take a trip to the local zoo. So that'll mean a smaller credit card bill, but when you multiply that by families across the country, it will also put some dent in economic growth because consumer spending's such a big driver of the economy.

INSKEEP: Do the numbers show that that is being multiplied by families all across the country?

HORSLEY: They do. Consumer spending grew more slowly in the last three months of 2022 than the previous three months. Retail sales were actually down in November and December during the busy holiday season, and there are definitely signs that high prices are starting to affect people's shopping habits. Dan Usher works for a company in Iowa that makes discount cereal. As overall cereal prices jumped nearly 16% last year, Usher says that discount business was pretty good.

DAN USHER: Last year was very wild. Because of inflation, a lot of consumers decided to switch to private label, which is the store brand, which is what we make. In times of economic hardship, we see pretty significant booms in business. So I'm kind of lucky in that regard.

HORSLEY: Usher is hoping to get a pay raise later this year, but in the meantime, he's also feeling the pinch of rising prices. He had some unexpected expenses this past year when both his water heater and his dishwasher conked out. So he's pinching pennies as well and says he plans to cut back on restaurant meals and maybe travel a little bit less.

INSKEEP: Scott, a couple of days ago on this program, we heard from Mark Zandi, he - the economist. He spoke with Leila Fadel. He was saying that he felt recession was now unlikely in the year that's now beginning, even though some tough economic times could be in there. What do other economists think?

HORSLEY: There's a range of views. A recent survey found a majority of business forecasters still think a recession is likely this year. But there are analysts like Zandi who think we will limp along, that the economy will slow down, but not actually shift into reverse. We are definitely seeing a downshift in some parts of the economy, notably manufacturing and housing. Housing was a drag on GDP at the end of last year. Doug Duncan, who's chief economist at the mortgage giant Fannie Mae, says because of rising mortgage rates, the housing market's already in a recession.

DOUG DUNCAN: It will be a difficult year. Some time in '24, it would be our anticipation that you'd start to see the pickup.

HORSLEY: Of course, the Federal Reserve has been aggressively raising interest rates in an effort to combat inflation, and we expect another rate hike next week.

INSKEEP: NPR's Scott Horsley, we remain bullish on your reporting. Thanks so much.

HORSLEY: Thank you. Transcript provided by NPR, Copyright NPR.

Steve Inskeep is a host of NPR's Morning Edition, as well as NPR's morning news podcast Up First.
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.
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