Earnings Reports, Layoffs Reflect Slowing Economy as 4Q GDP and Inflation Data Loom

On Thursday, the government will issue its advance estimate of the nations economic output for the fourth quarter of 2022.

The report on gross domestic product will likely show the economy grew at an annual pace somewhere around 2.6% or so, down from the 3.2% in the third quarter. The Federal Reserves campaign to arrest inflation by raising interest rates is working and the consequences of the higher borrowing costs are a slowing economy that will be reflected in the GDP data.

But for those looking for more evidence of a slowdown and even the possibility of a recession in the second half of this year, this weeks early read on corporate earnings is already providing some insight. Add to that recent layoff announcements from big-name companies like Google, Amazon and Microsoft, and the picture becomes even more clear.

Thursdays GDP report is expected to show a slower pace of economic growth for the fourth quarter of 2022, and slowing economic growth will be a big theme for 2023, which will put pressure on corporate earnings, said Richard Saperstein, chief investment officer at Treasury Partners. The 10-year Treasury yield has declined by 70 (basis points) from its peak and the yield curve remains firmly inverted, signaling a weaker economic outlook in the second half of 2023.