Q2 2023 Economic Reports

GDP GROWTH: TRENDING IN Q2 2023

The Commerce Department said the U.S. economy grew at a 2.4% annual rate in the second quarter, an increase from the 2% gain in Q1, defying both expectations and attempts by the Federal Reserve to slow it down to curb inflation.

Economists are now scaling back their prediction that national output will be pushed into a recession this year due to recent interest rate hikes by the Federal Reserve to reduce inflation. The central bank has raised the benchmark rate 11 times since last year. A unanimous decision by the Federal Open Market Committee in late July raised the benchmark rate to a range of 5.25% to 5.5%, a 22-year high.

Meanwhile, inflation was held in check in the second quarter. The personal consumption expenditures price index gained 2.6%, down from a 4.1% first-quarter rise and well below the Dow Jones estimate for a gain of 3.2%. “It’s great to have another quarter of positive GDP growth in tandem with a consistently slowing inflation rate,’’ said Steve Rick, chief economist at TruStage. “Consumers are getting a reprieve from the rising costs of core goods, and the U.S. economy is off to a stronger start to the first half of the year.”

Research | Inflation, The Economy, and Commercial Real Estate

In June and July of this year, the Fed raised the interest rate at the fastest pace in forty years: it raised the federal funds rate 75 basis points at each open market committee meetings. Why did it do so, and what do its actions and current economic data say about the economy? This report will investigate and answer these questions, as well as explore the thinking that is guiding the Fed’s policies and explain the implications of these policies for commercial real estate.

INFLATION AND THE ECONOMY

• What is the federal funds rate and what did the Fed do with it in June and July of 2022?

• Why did the Fed raise the fed funds rate by so much in June and July?

• What does current economic data say about the state of the economy?

• What does the mixed economic data imply for future Fed policy regarding rate?

COMMERCIAL REAL ESTATE IMPLICATIONS

• Given future increases by the Fed and current inflationary conditions, what implications does this have on commercial real estate?

Supply Chain Issues: A Critical Analysis

Evidence of the supply chain crisis we are facing is hard to miss. Right now, off the coast of Los Angeles, over 80 large container ships are sitting idle waiting to dock and offload their cargo. The ramifications of this and other bottlenecks in our global supply chain system have caused a backlog of nearly $3 billion in goods that have been ordered but not yet shipped, according to U.S. Census data.1 What caused this to happen, what happens next, and when will it be over? This report will answer these questions and explain the causes behind our current predicament.

WHAT CAUSED THE CURRENT SUPPLY CHAIN BACKLOG?

The crisis began when the pandemic led to temporary plant closures to contain the outbreak, workers calling out sick, and international borders being closed. Many companies assumed consumers wouldn’t want to spend money during a crisis, so they scaled down production and furloughed and laid-off employees.