With inflation remaining persistently high toward the enꦯd of last year, many economists and analysts saw a recession coming in 2023. But that didn’t happen.

Few, if any, accurately captured the economic exper♏ience during this unpredictabl🐎e year.

From interest rates to stock markets, analysts and ꧟economists had a lot of predictions on how the economy would perform in 2023. Here’s some of what they got right and wrong.

✨No Recession in S𓃲ight as GDP Surpassed Expectations

Powered by resilient consumers, the U.S. economy defied expectations of a recession by posting consistent growth in 2023. The most recent results show 5.2% GDP growth in the third quarter, com♉ing after 2.2% in the first quarter and 2.1% in the second. ♊;

Most 澳洲幸运5开奖号码历史查询:economists didn’t see that coming, and they generally forecast a 70% chance of recession, according to a Bloomberg monthly survey of economists from December 2023. The median estimates forecast anemic 0.3% GDP growth in 2023.

The Wells Fargo Investment Institute forecast a 澳洲幸运5开奖号码历史查询:recession in the first half of 2023 on the lagging effect of the Federal Reserve’s interest rate hikes. It said overall growth for the year would be -1.3%.  Comerica saw GDP growing at only 0.1%, while Goldman Sachs forecast that the U.S. would narrowly avoid a recession in 2023, with GDP growth of about 1%.

Forecasters Missed Power of Labor Mark🐼et, Pent-Up Dema🤪nd

Going into 2023, economists saw a lot of reasons to suspect the economy would at least slow down, if not go into recession, including the 澳洲幸运5开奖号码历史查询:inverted yield curve in which short-term Treasurys had higher yields than lon🧔g-♍term bonds, and a decline in leading economic indicators.

“There were a lot of yellow flags,” sai💯d Gary Schlossberg, global strategist for the Weܫlls Fargo Investment Institute said. 

But after the economy weathered the spike in inflation in 2022, the subsequent drop improved purchasing power for workers, Schlossberg said. Another of the many positive factors was the 澳洲幸运5开奖号码历史查询:Federal Reserve’s lending program it set up for banks after the collapse of 澳洲幸运5开奖号码历史查询:Silicon Valley Bank and 澳洲幸运5开奖号码历史查询:Signature Bank, which added liquidity to the system.

There were a lot of post-pandemic factors like 澳洲幸运5开奖号码历史查询:pent-up demand for services and automobiles and a surprisingly resilient labor market that economists couldn't have factored in, Schlossberg said.

“We saw the benefits as inflation continued to move lower, rather than the economy following inflation down,”🔯 Schlossberg said. 

Analysts D꧙idn’t See Interest Rates This High or Inflation Remaining Elevated

While many analysts thought inflation would cool in 2023, some were too optimistic in their assessment of how much prices would fall. The Personal Consumption Expenditures (PCE) “core” price index showed that inflation in 澳洲幸运5开奖号码历史查询:October fell to 3.5% on an annualized basis, its lowest reading since Ap🎃ril 2021, but still above the Fed's 2% target rate. ♚

Goldman Sachs forecasted core PCE would decline to 3% in late 2023, the same prediction that the Bloomberg survey of economists delivered. The Wells Fargo Investment Institute was further off, forecasting that inflation would come in lower than 3% by year’s end. 

Analysts were also more optimistic about int🌸erest rates. The Federal Reserve adopted the “higher for longer” mantra for the back half of 2023, keeping interest rates at the same level for the last five months. Goldman, Comerica and Wells Fargo all anticipated that the Fed would either not hike that high or would have already ma♏de cuts to the rate.

Sto♋ck Calls Fal🥀l Short as S&P 500 Has Runaway Year

With the economy steering clear of recession, the stock market soared, too. The benchmark 澳洲幸运5开奖号码历史查询:Standard & Poor's (S&P) 500 in 2023 performed better than its historical average. The S&P 500 has gained about 25% for the year, well above its 澳洲幸运5开奖号码历史查询:average annual return of about 10%. 

Most analysts didn’t see the banner yearဣ for stocks coming. 

JP Morgan saw a rough start for stocks, predicting about a 9% annual increase for the index. Wells Fargo got closer, forecasting a target range of 12% to 17% growth for year-end 2023. Theꦕ market never hit the early lows Comerica forecast, causing their year-end prediction of about 10% growth to fall short.  

Economic Forecasting is a Subjective Task

Forecasting the economy a year out into t෴he future is a difficult task, but Schlossberg said economists look at several factors.

In addition to assessing drivers like inflation, interest rates, financial conditions, and 澳洲幸运5开奖号码历史查询:liquidity, economists will also look more closely at individu💧al sectors, sales trends, and housing affordability, and examine special condi💖tions for any given cycle, such as the lingering effects of the pandemic. 

“Forecasting a recession is tough enough, but forecasting the timing and the depth of a recession is really difficult,” he said. “It’s very subjective.”