GDP

GDP Growth Strong in Fourth Quarter;
Fed Actions To Play Large Role in 2022

• Economy exceeds expectations in fourth quarter. Annualized gross domestic product jumped 6.9 percent in the final period of last year, largely on the back of an increase in inventories. Personal expenditures contributed nearly 2.3 percent to last quarter’s gain, primarily due to holiday spending that was spread throughout the period.
• Commercial real estate well positioned. Uncertainty surrounds the ability of the Fed to both maintain maximum employment and rein in price increases. If the central bank overcorrects, it would temper or even suspend growth; commercial real estate, however, is in a strong position to weather these headwinds.
• Hospitality poised for gains in 2022. While the worst projections for retail never emerged, the travel industry did take a large hit due to the impact of the pandemic. Since the dissemination of vaccines, tourism has markedly improved.

Challenges Still Ahead

• Headwinds mounting for growth this year. Several factors will have a ripple effect on the economy in 2022, testing the Fed’s ability to maintain price stability and GDP growth. Inflation, which
  is at a 40-year high, is a prominent concern, and will require the Federal Open Market Committee to be more aggressive with rate hikes.
• Employment situation challenged. Approximately four million jobs have not been recouped since the recession, despite the fact the unemployment rate is under 4 percent. The overall workforce
  has declined significantly as baby boomers have retired and some households have taken on added family care responsibilities or transitioned to one income.

Sources: Marcus & Millichap Research Services; Bureau of Economic Analysis;
Bureau of Labor Statistics; STR, Inc. U.S. Census Bureau

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Economy Returns to Pre-Recession Levels, Fueled by Stimulus

• Growth remains steady. In the second quarter, the economy expanded 6.5 percent on an annualized basis.
• Retail and hospitality are real estate’s biggest beneficiaries. As the economy expands and residents take advantage of more options, retailers and tourist destinations are hosting more visitors.
• Consumer spending drives GDP. Personal consumption grew at an annualized rate of 11.8 percent of GDP last quarter.

Headwinds Short-Term Concern

• Rising COVID-19 cases cloud future. The much more transmissible Delta variant of the novel coronavirus is giving policymakers pause and could result in future restrictions that temper the economic recovery.
• Government spending could amplify GDP. A $1.2 trillion bipartisan bill that will fund infrastructure projects over the next several years could support the publicly financed portion of the economy.

* Through 2Q
Sources: Marcus & Millichap Research Services; Bureau of Economic Analysis; National Bureau of Economic Research; Smith Travel Research; U.S. Census Bureau

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