With inflation impacting housing, grocery and gas prices two years into the COVID-19 pandemic, John Connaughton, professor of financial economics for the Belk College of Business at UNC-Charlotte, is forecasting a generally stable 2022 after significant post-lockdown growth in 2021.

Connaughton’s analysis showed the annual GDP growth rate will be 3.1% in 2022, indicating a generally stable year after significant growth in 2021.

In North Carolina, the real gross state product (RGSP) was 5.1 percent higher at the end of 2021 than late 2019. There were 31,800 fewer available jobs, and the unemployment rate was 0.6% higher.

“Most of where we were in 2019, we’ve gotten back or gotten pretty close to back,” Connaughton said. “Now it’s time for organic growth in the economy to take over. That’s really what we’re going to see going forward.”

From February of 2022, the findings revealed several categories of consumer goods are driving inflation, such as gas, energy, food, the sale of new and used vehicles and airline fares. The annual increase was 7.9 percent.

“Obviously inflation is starting to come up and be an ever-increasing problem as it takes money out of consumer pockets,” Connaughton said. “We’ve seen what’s happening, and you’ve got a basic fundamental problem. You live where you live, you work where you work, and you drive what you drive and as a result of that, there’s very little price elasticity.”

Of that 7.9 percent, gas prices make up 38 percent of that, and used cars and trucks make up 41 percent. Energy expenditures have risen 25.6 percent annually.

Figures showed that North Carolina has a middle-of-the-pack unemployment rate for the country and consumer confidence is slightly down from where it was in 2021

The increase in housing prices in several North Carolina real estate markets has been well-documented. In the Triangle, homes are less affordable than ever. Connaughton said he doesn’t believe skyrocketing home prices will abate until a recession comes.

“It is absolutely crazy right now,” Connaughton said of the housing market. “It’s crazier today than it was a year ago, and it was crazy a year ago.”

“It’s caused by two things. One, we still have relatively low-interest rates. They’re not as low as they were a year ago or six months ago, but they’re still historically very low. Secondly, no matter how we cut it, we simply have not been building houses, take cities like Charlotte, Atlanta, Austin, those cities are growing and growing and growing, but we’re not building new houses. It’s driving up the price of used houses considerably.”

On Wednesday, the Federal Reserve announced it was raising interest rates for the first time since 2018.

“You can’t stop inflation by talking about it, you have to have contractionary, monetary policy,” Connaughton said. “The only way we’re going to see this inflation problem go away is essentially see the interest rates rise to see positive, real rates.”

Connaughton described the Ukraine-Russia conflict as “the great unknown.”

“Prior to the Ukraine invasion, we were looking at potentially a recession in 2023 because there was a belief that the fed was simply not going to get inflation under control soon enough and was going to have to do some serious constraints on monetary policy.”

COVID and the omicron variant are also still problems in countries like China, where they’re shutting down cities amid more outbreaks.