Inflation and Economic Update

Everyone is concerned today about inflation, as we continue to witness heavy price increases, especially in consumer goods and energy. Thus, we decided to address the inflation issue again.
Economic forecasters, such as Kiplinger and The Economist, believe that inflation will ease somewhat through the remainder of the year— likely down to slightly over six percent from over eight percent. Some sources expect the inflation rate to decline faster in 2023, shrinking to as low as three percent by the end of next year. Forbes, however, believes that inflation could still worsen due to increases in consumer spending caused by the concern that prices will continue to rise.
As long as there is a semiconductor shortage, expect auto and truck prices to remain high. Similarly, heating and gas prices likely will remain high so long as the Ukraine war continues.
Are We Heading for a Recession?
The Federal Reserve plans to continue to raise interest rates to curb inflation. This means fewer loans and a tightening of the money supply, which historically results in an economic slowdown and a possible recession. Many business leaders are predicting a recession, but question when, while some forecasters believe the probably will remain low through 2023. Some bank presidents, however, believe a recession will arrive sooner.
Although the economy remains strong, profits of many corporations have declined.. Apparently, this is not due to declining income but investment in strategies to improve resilience to supply chain shortages.
What should you do given the uncertainty? As we mentioned in our May article, concentrate on saving money. These actions include:
• Buying in bulk
• Eliminating unnecessary expenditures
• Considering refinancing your home now
• Getting zero-percent balance transfers on credit cards
• Reducing your home energy usage
• Carpooling whenever possible
• Shopping for better auto and homeowner insurance rates
• Using coupons when shopping for groceries
We recommend speaking with your tax professional or accountant concerning your situation. As a reminder to our clients, we offer you complimentary tax planning advice.
Professional Tax Services is a locally owned provider serving over 3,500 local residents and businesses. For more information, call 661-259-1967 or visit www.protaxservices.com. Through their complimentary EZ2 Thrive program, they provide unlimited free tax planning advice to their clients.