With 2022’s first quarter still taking shape and in spite of the tragic outbreak of war between Russia and Ukraine,1 the US economy is showing a strong rebound from pandemic-related shutdowns and the consequent deep recession. The economy has reacted to massive federal spending increases; supply constraints; somewhat chaotic world economic forces; and a persistent, uncertainty-laden COVID-19 pandemic. Along with all this, Consumer Price Index (CPI) inflation—the result of the massive spending combined with stubborn supply chain issues—is now running at 7.5 percent with little sign of easing any time soon.2 Now with the Federal Reserve (Fed) committed to calm inflation, a goal made more lofty by the Russia-Ukraine war’s effects on commodity prices, the economy seems positioned to continue growing at a solid pace.
In 2021’s third quarter, real GDP growth hit 2.3 percent,3 much lower than the 6.5 percent growth registered in the second quarter but closer to what can be thought of as normal. First estimates for 2021’s fourth quarter, released on January 27, were a sizzling 7.0 percent, making third quarter’s weak growth look like an anomaly.4 The high growth was driven largely by strong consumer spending and businesses replenishing inventories. Annual real GDP growth in 2021 will probably be 5.7 percent, the strongest performance since 1984, when, again, the economy was on the rebound from a serious recession.5 Looking further ahead and taking account of the Fed’s plan to slow the economy, Wells Fargo predicts that US real GDP growth be 3.4 percent in 2022 and 3.0 percent in 2023; the Wall Street Journal calls for 3.3 percent growth in 2022 and 2.4 percent in 2023;6 and the International Monetary Fund expects to see 4.0 percent and 2.6 percent for 2022 and 2023, respectively. These estimates, along with data for average real GDP growth since 1948, are shown in table 1. As indicated, the US economy is expected to perform at about its historic average.