The Higgins Report: Economy Ends Year on an Up Note

Solid Q4 GDP caps a tumultuous 2022

By Joe Higgins, YSN Contributor

  • Q4 2022 GDP came in +2.9% and beat expectations of 2.6%
  •  Consumer spending was up 2.1% but down from 2.3% in Q3, which indicates a slowing economy
  • The Federal Reserve has raised interest rates seven times for a total of 425 basis points

Gross domestic product is defined as the amount of goods and services produced in one year in the U.S.

Goods include the things our members sell: appliances, furniture and electronics. Services are everything else, like travel, a ball game or seeing a doctor. At the end of each year, the GDP’s annualized number will tell us if we had a successful 12 months. It’s like a business’s bottom line; we count on this number to be positive, and the higher the better. 

Turns out the U.S. economy had another excellent year in 2022, as measured by the Bureau of Economic Analysis (BEA). As the world’s largest, most diverse, resilient and productive economy, the fourth quarter of 2022 came in at an annualized rate of 2.9%, vs. Wall Street’s expectations of 2.6%. While this reflects a slowdown from the prior quarter’s pace of 3.2% growth, it is still a solid performance, especially considering that last year’s first and second quarters were both negative. 

So, the bottom line for the year 2022 is that GDP grew 2.1%, very close to its ten-year average, but nowhere near the 5.9% increase in 2021. While this doesn’t allay any fears of a recession, it does indicate that our economy is more robust than most Americans believed. 

Consumer spending, however, was a mixed bag in this report — up 2.1% in Q4 but down from 2.3% in Q3. This was a warning that the economy slowed in the fourth quarter and will likely continue this trend into the first half of 2023. 

Other indicators are also flashing red: credit card debt increased over the past three months, and personal savings and income dropped precipitously. It is clearly a case where Americans are going into debt rapidly to maintain their living standards. Given our history, it is ultimately unsustainable when cash gets short and consumer borrowing increases. 

The concern for the home goods business is that consumers cut back spending on goods and increased their spending on services, a trend we have witnessed all year. Fortunately for BrandSource members, the most significant declines were in automobiles and food, not furniture and appliances.  

Another roadblock for our business is the fallout from the housing industry. Home sales were down almost 30% last month, and we see continued pressure on homebuilding and home sales well into this year, as the Fed is likely to continue raising rates. The housing downturn was primarily prompted by mortgage rates surpassing 7% in mid-summer, although it is now sitting at 6.6%. What’s more, housing affordability has been at its lowest levels since we began keeping records. 

The Federal Reserve has now raised interest rates seven times for a total of 425 basis points, in an effort to reduce inflation without causing a recession, or what Fed Chair Jerome Powell calls a “soft landing.” This is the fastest round of rate increases in 40 years, and we’ll likely see four more rate hikes of 25 basis points each in 2023. 

Tech layoffs aside, we have practically eliminated the concern over the labor market tanking, as unemployment remains at an astonishing 3.5%. Jobs have been the one bright spot in our economy and could save us from recession.

The Bottom Line 

The most common question I was asked at the 2022 BrandSource Summit was, “Will there be a recession in 2023?” You might wonder why Americans are so concerned about a downturn. The answer is simple: CEOs, the big banks, business schools and economists were all predicting a recession due to the Fed’s stated objective of bringing down inflation. A recession story runs in every news cycle. It seemed logical last year; rising interest rates usually precede a recession. At last year’s spring show in Las Vegas, I predicted we would not have a recession in 2022.

This year my answer is, yes, we may have a downturn, but if we do, it will be similar to the recession we experienced in 2001, when most Americans didn’t even know we were in one. That said, there are a lot of red flags out there that haven’t impacted the economy yet, although cracks are beginning to emerge: Inflation is still a problem; housing is in the tank; there is a war in Ukraine; America could default on its debt; consumer spending will continue to drop; and the Fed is still trying to slow the economy.

Before the end of this quarter, we should be able to determine whether to expect a soft landing or prepare for a bumpy one. 

Stay tuned.

Joe Higgins is a 44-year veteran of GE and Whirlpool Corp. who brings his executive experience to bear as a business consultant, AVB keynoter and YSN contributor. Visit his website, Quest 4 Quality with Joe, at

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