US gross domestic product is expected to show growth of 0.4% for this year before entering a “modest” recession in 2023, according to December 2022 commentary from the Fannie Mae Economic and Strategy Research Group.

The ESR Group reported it views the current rate of personal consumption growth as unsustainable given the combination of a low personal saving rate and an elevated ratio of consumer debt to personal disposable income. With many cyclical indicators continuing to point toward economic contraction — including an inverted yield curve — the ESR Group forecasts 2023 GDP growth to be negative 0.5%.

In 2024, the group expects the US economy to expand again at a 2.2% annual growth rage.

“The economy caught its breath in the second half of 2022, but that doesn’t change our expectation that it will run out of air in early 2023 via a mild recession,” said Doug Duncan, senior VP and chief economist at Fannie Mae. “While uncertainty still exists, a growing set of signs, including an inverted yield curve, weakness in The Conference Board’s Leading Economic Index and a slowdown of manufacturing activity, support our ongoing contention that the economy is likely to contract next year.”