Advocacy News – Nov. 2, 2022
Economic figures recently released continue to raise questions about what they truly mean and strain that could lead to a recession going into next year. The economy grew a slightly higher than expected (2.6% so good news) in the third quarter. At the same time, several domestic and global constraints continue to signal growing headwinds for Michigan families and businesses. What is the ongoing outlook and what does 2023 hold? Read on and register for the MI Chamber’s Economic & Business Outlook Nov. 10 as we explore these very issues and how to best prepare.
Looking at the numbers
Analysis from the U.S. Chamber shows that economic growth in Q3 came from gains in personal spending, business investment, trade flows and government spending:
- Personal spending rose 1.4%. Spending on goods was down (especially automotive), but growth in services spending, particularly healthcare and “other” services, more than made up for that loss.
- Residential investment, unsurprisingly, fell sharply by more than 26%. The housing market is slowing rapidly as interest rates rise.
- Business investment was robust though, rising 3.7% on the back of spending on equipment and intellectual property.
- Inventories fell as businesses continue to draw down their existing stocks and supply chain issues remain a problem.
- Exports rose more than 14% and imports fell 7%, with net trade surplus adding substantially to growth in the quarter.
- Government spending added to GDP as well, especially large increases in defense spending.
Why it matters
The strong 3rd quarter means the description of the current economic situation as reflecting second-hand pessimism is still accurate.
- Consumers and businesses feel bad about the economy when surveyed, but the underlying data, reflecting their actual spending activity, tells a more positive story.
Economists predict that the chances of the economy entering a recession going into 2023 currently stands at around 65% and growing.
What about low diesel fuel supply?
Additionally, surges in the price of diesel nationally could lead to higher inflationary pressures. Analysts say that a confluence of factors, long bubbling beneath the surface, are now coming to a head as colder temperatures bring more seasonal demand for diesel, a fuel that powers trucks and buses and is also used in heating.
The U.S. has about 25 days worth of diesel left, a level that’s considered very low. As a result, Energy Secretary Jennifer Granholm called on industry to cut back its exports of “refined products” which include diesel and gasoline, in recent weeks, arguing that the supply is needed stateside.
The industry has pushed back, arguing that exports are important for maintaining global supplies, especially amid disruptions caused by the conflict in Ukraine. Forbes reports that ExxonMobil’s CEO wrote a letter to the Biden administration last month stating “[r]educing global supply by limiting U.S. exports to build region-specific inventory will only aggravate the global supply shortfall.”
Virtual Economic & Business Outlook event provides key resources
These topics and more – including potential solutions to business pain points – will be discussed at the MI Chamber’s annual, in-demand Economic & Business Outlook happening virtually Nov. 10. Join other business and community leaders from across the state to hear the latest updates and insights from economists and experts. Make sure to register today!
For questions or more information, contact Wendy Block at wblock@michamber.com