MADISON, Wis.–While data show the economy contracted in the first quarter, the Fed’s actions to push rates up will not create a recession, according to CUNA’s chief economist, Mike Schenk.
In the May 2022 CUNA Economic Update, Schenk addressed those issues as well as the overall health of the economy and more.
Among the points covered in the update:
- First-quarter GDP results showed a contracted economy: A “huge buildup” of inventory at the end of last year and heavy consumer spending on imported goods at the beginning of the year hurt GPD, but Schenk predicts the economy to rebound in the second quarter, CUNA stated.
- An active Fed will not produce a recession: An engaged Federal Reserve that's trying to slow the economy necessarily will not cause a recession, according to Schenk. “If you forced me to put a percentage on prospects for recession, I would say, at the moment, maybe somewhere in the neighborhood of 35-40%. We are looking at all this data on an ongoing basis in real time, adjusting our outlook based on that. But, at the moment, I'm still relatively upbeat.”
- “Exogenous shocks:” Supply chain disruptions will continue and overall prices will increase by 5%, due to COVID and the war in Ukraine.
- Stock market performance misinterpreted.“Since 2015, the stock market has averaged north of 10% average returns over this entire period of time,” said Schenk. “That's a pretty decent outcome in the grand scheme of things. Actually, as a result, that's a bit higher than long-run average increases in equities which are on average about 8% overall.”
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