A few facts about 2022...
THE YEAR IN BRIEF
2022 was a year of challenges....High inflation challenged consumers and the Federal Reserve, which took the benchmark interest rate to a level unseen in 15 years. As it cost more to buy and borrow, businesses struggled to maintain their profit margins, which shook confidence on Wall Street. Mortgage rates rose, which impeded home sales. The first war in Europe in 30 years and COVID-19 lockdowns in China affected supply chains and overseas economies. The U.S. economy added jobs all year, and gross domestic product (GDP) rebounded in the summer. As the year ended, Congress passed new legislation to help retirement savers, and seniors received their most significant Social Security benefits increase in decades.
THE U.S. ECONOMY
Inflation was an issue all year. The Consumer Price Index (CPI) rose from 7.5% in January to 9.1% in June, down to 7.1% in November. The Federal Reserve responded to this inflation pressure with seven interest rate hikes, taking the target range on the federal funds rate from 0.25%-0.50% in March to 4.25%-4.50% by December. The central bank also phased out its bond-purchase program, born when the economy needed a stimulus. (1,2)
Economic activity slowed in the first half of the year. Real GDP came in at -1.6% for Q1 and -0.6% for Q2. Activity improved in Q3 with 3.2% growth. Consumer spending was strong; the Bureau of Economic Analysis recorded monthly gains of 1.2% in January, March, and June. The consumer spending indicator rose 0.6% or more in eight of the first eleven months of the year. (3,4)
Did the U.S. flirt with a recession in 2022? Not according to the labor market. America's workforce added an average of 392,000 net new jobs per month in the first eleven months of the year, and unemployment never exceeded 4% (the jobless rate, according to the Bureau of Labor Statistics, was at 3.7% in November). (5,6)
Even with higher borrowing costs, the services sector grew all year. The Institute for Supply Management's non-manufacturing sector index stayed above 50 (indicating expansion) for each month of 2022. ISM's companion manufacturing sector index posted its first sub-50 reading since May 2020 in November. (7,8)
The rising interest rate environment hurt the housing market. Mortgage rates more than doubled between New Year's Day and Christmas. Home sales slipped for nine months beginning in February, and prices fell. The National Association of Realtors calculated the median existing-home price at $379,100 by October, down from June's historic high of $413,800. The number of homes on the market grew. (9)
We enter 2023 with Social Security recipients getting an 8.7% raise, the largest inflation-adjusted boost to retirement benefits since 1981. Reforms passed in Congress now give tax-advantaged retirement account owners one more year to put off mandatory annual withdrawals (in most cases, they must now begin at 73) and allows larger catch-up contributions to these plans starting in 2024. (10,11)
If you have any questions about planning for your retirement and/or Social Security, please reach out to me!
Wishing you a Happy and Healthy New Year from the team at Maisch Financial Group!
CITATIONS:
1. Bureau of Labor Statistics, January 1, 2023
2. Forbes Advisor, December 14, 2022
3. Trading Economics, January 1, 2023
3. Trading Economics, January 1, 2023
5. Bureau of Labor Statistics, December 2, 2022
6. CNN Business, January 1, 2023
7. Investing.com, January 1, 2023
8. Investing.com, January 1, 2023
9. Forbes Advisor, December 21, 2022
10. Yahoo! Finance, December 29, 2022
11. Yahoo! Finance, December 23, 2022
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