WASHINGTON--CUNA has released its July 2022 CUNA Economic Update, and Senior Economist Dawit Kebede shared concerns for continuing high inflation and the possibility the nation is facing a recession.
“It is very difficult to say that the economy is in a recession when you have a labor market this strong. A strong labor market implies strong consumer demand,” said Kebede.
Highlights from the July update include:
- Housing investment and car sales: Second quarter car sales and housing investments have declined, but car sales are expected to rebound due to supply chain improvements while new housing construction is expected to soften.
- A strong consumer and labor market: The CUNA economist revealed that the economy recovered most of the jobs that it lost during the pandemic.
- Shift in spending preference: Consumers switched from purchasing goods to services such as traveling and dining out.
Kebede made the following predictions on the Federal funds rate:
- The federal funds rate will reach 3.15% by this year end and it will be 3.25% by next year.
- The unemployment rate will stay the same at 3.6% through the end of the year and will inch up to 4% in 2023.
- The economy to grow by 1% this year and probably by 1.5% next year.
“Prices have increased 9.1% year over year and on a monthly basis that increase was 1.3% from May to June. That's really a very big increase … However, energy prices have contributed to half of the increase during that time. If that was not the case, inflation would have been half of that,” Kebede said.