The U.S. and Michigan economies made a strong showing this year, despite the impact of the coronavirus. But there may be trouble ahead in 2022.
Michigan State University economist Charles Ballard says in 2021, the U.S. made up the reduced gross domestic product it posted the year before and gained back nearly all lost jobs.
However, strong consumer demand coupled with a crippled supply chain system drove prices up, particularly in the past few months.
Ballard says the inflation rate has risen at its fastest pace since 1982.
“Will that continue? We’re not sure,” he said. “Much depends upon whether we can get these supply chains put back together and how fast we can do that.”
Ballard believes the Federal Reserve will “tap the brakes” in 2022 with a series of small interest rate hikes.
“I think what they’re trying to do is a delicate balance where they ease off their expansionary policies and try to take some of the steam out of inflation without tipping the economy into a recession,” he said.
The Fed has also announced it will purchase monthly bonds at a slower rate.
Ballard predicts some sectors, like digital electronics, will remain strong. He believes others, like the commercial real estate market, may not fare so well as more Americans continue to work from home.