We have revised up our expectation for Q4 GDP growth, mainly reflecting the November plunge in goods imports. We now expect growth of 2.7% q/q (annualised).
However, there are signs of the economy weakening at the end of 2022, with further falls in retail sales and industrial production in December, while business surveys continue to fall.
The revision to Q4 GDP growth sees our 2023 forecast lift to 0.6% (from 0.2%) but we still expect the US to enter recession in 2023. We also still expect the fed funds target range to peak at 4.75% to 5.00%, with 25 bp increases at each of the February and March meetings.