IU, Purdue economics experts weigh unknowns in 2023 economy
INDIANAPOLIS (WISH) — The economy brings a lot of unknowns for the rest of 2023.
The high inflation in 2022 and thoughts of a recession bring concerns, but experts hope neither will happen this year.
Consumer prices decreased by 0.1% in December, the Bureau of Labor Statistics reported Thursday in its Consumer Price Index. The last time prices were lower than the previous month was in May 2020.
Philip Powell, an Indiana University Kelley School of Business professor, sees an optimistic outlook of slow economic growth. “Now what determines whether or not we land on the optimistic scenario is two things. The first is ‘Do consumers continue to send as they have been through the year?’ and the second thing is ‘Are the interest rate increases generating the reduction in inflation that the markets expect?’”
This means it grows at 1% or 1.5%, and employment and unemployment are only going up by a point.
He says the pessimistic scenario has the economy shrinking by 2% and unemployment at three points.
With the possibilities on the horizon, Joe Fitter, an Indiana University Kelley School of Business senior lecturer, encourages what he calls a defensive financial posture.
“Potentially, jobs may be in a situation where our job may not be as secure as we thought,” Fitter said.
Food prices were some of the most affected as inflation rose; food costs rose 10.4 % in 2022, according to the Bureau of Labor Statistics.
Jayson Lusk, the head of the Purdue University agricultural economics program, said, “Consumers not surprisingly are saying they are paying higher food prices.”
When it comes to food insecurity rates, Lusk said, that number stabilized. “This is essentially a measure of whether consumers can afford to eat that’s remained fairly steady over the course of the last year. That’s good news because it’s happening in spite of the food prices.”
Despite concerns about a recession, experts warn that long-term savings cannot fall by the wayside.
“You don’t want to lose focus on the long term as a result of that. We don’t want to back away from those long-term investment activities like putting money away in a 401k or other retirement savings,” Fitter said. “We want to keep a vision both on the short term and really keeping our eye on that long-term ball as well.”
Falling gasoline prices helped bring the inflation rate down in December.
Experts said a complete recession is not a certainty at this point and only time will tell.