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is article suggests that an economic slowdown is the likeliest scenario
for 2023. But what are the chances of a further decline in business activity?
While Moody's Analytics sets the odds at 50-50, stopping the trend
of continuous negative growth in real GDP will require a bit of luck.
" e U.S. economy will enter 2023 being vulnerable to anything that
might go wrong," Yaros says. He points to risks such as a resurgence
of the pandemic in China, a worsening of the Russia's war on Ukraine
and another energy supply shock that would hit consumers' pocketbooks.
Avoiding a decline in business activity will also depend on a couple
of things going right, adds Yaros. e ebullient labor market will need
to cool down at a pace that softens wage increases without sparking
economic turmoil. Most important, the Federal Reserve, which raised
interest rates by three quarters of a point four times in 2022, will need
to successfully tame infl ation without allowing its continual increase in
interest rates to spike the economy.
NOTE: e Fed has hiked interest rates at its last six straight meetings,
something it hasn't done since 2005. In addition, not since the 1980s
has the Fed raised interest rates 3.75 percentage points in a single year—
and many economists think it likely isn't done yet.
WILL BUSINESS ACTIVITY
DECLINE IN 2023?
