Five key US economic sectors to keep an eye on in 2022

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Five key US economic sectors to keep an eye on in 2022

 Five key US economic sectors to keep an eye on in 2022
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Highlights

  • The US GDP is expected to grow at 3.5% in 2022.

  • In the third quarter of 2021, the US GDP growth was down to around 2%.

  • An expected rate hike next year might negatively impact the stock market.

The US GDP growth fell to around 2% in the third quarter from a year earlier. However, the full-year growth is expected to be 5.2% and expand by 3.5% in 2022.

Likewise, the Consumer Price Index (CPI) YoY change is expected to be 6% in December 2021, while it is projected to be 1.9% in December 2022.

These figures will be vital as we try to map the sectoral performance of the economy.

While the pandemic continues to pose a challenge, the ongoing recovery in the labor market and some key industrial segments indicate better prospects.

Although the GDP growth projection for 2022 does not bring much relief, this conservative figure might change as the economy gets into high gear. 

However, a potential rate hike in 2022 might negatively impact some stocks. It is also possible that the current high inflation could be short-lived once the supply chain woes start fading. The wild swing in the energy prices might have also contributed to the current inflation. 

The demand-driven inflation might be good, but the supply-induced rise is something that governments need to be cautious about.  

Here we discuss five sectors that would be worth watching in 2022. 

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Energy: 

This year, the energy sector has been resilient, but the renewable segment will likely be the focus in 2022. In addition, climate concerns have accelerated the growth of the industry lately.

Countries have already put their net zero-emission goals in place and pushing for carbon reductions. Solar, wind, thermal, hydrogen and other clean energy sources will be the focus.

In addition, the industry estimates increased demand for energy in sectors like road transport, air travel, and other business processes. As such, demand for green energy is set to grow.

The S&P 500 Energy Sector Index grew 45.71% YTD, further underscoring the current energy demand. Energy companies like Exxon Mobile (XOM) are also entering the green energy segment.

The XOM stock jumped around 44% YTD. Another company, Plug Power, Inc. (PLUG), a clean energy company, is expanding its European network with the rising demand for renewables. 

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 5 sectors on the watchlist for 2022)

Source – Pixabay

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Healthcare:

The global healthcare market is expected to hit US$11.9 trillion by next year.

The demand for healthcare for different sections of society, including the ageing population, would keep the industry in high gear. Those associated with healthcare technologies, especially the digital segment, would be the biggest beneficiaries.

The US healthcare industry is huge. According to the Centers for Medicare and Medicaid Services, the US healthcare expending would be US$6.2 trillion by 2028, up from US$3.8 trillion in 2019. Currently, healthcare spending constitutes over 17% of US GDP.

The sector is likely to remain in focus as the covid virus is not leaving anytime soon. The biotechnology companies engaged in finding cures for viral diseases will be benefited.

The S&P 500 Health Care Sector Index grew over 14.53% YTD. Expanding hospital chains and other health facilities to new areas indicates this growth momentum. 

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Technology:

According to industry estimates, the global information technology industry would spend around US$5.3 trillion in 2022. Although there has been no big-bang innovation of late, 2022 could see the founding of another big revolution in the industry.

The metaverse and blockchain initiatives could be the next game-changer. The entry of these technologies in various spheres from finance, gaming to communication might see the birth of the next big-ticket enterprises that would lead the next decade. 

The IT business and services, infrastructure, emerging technology, and telecom services will remain the key segments in the US. According to analysts, software and emerging technology segments will attract more than half of the US technology market spending. 

The S&P 500 Information Technology Sector Index, which includes major technology companies, increased 28.34% year-to-date.

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Retail Sector

Retail is the evergreen sector. In 2020 and 2021, e-commerce led the growth. In 2020, the US e-commerce sector generated US$432 billion in revenue. It is expected to reach more than US$502.0 billion in 2022. Today, technology has penetrated all business spheres globally, and the retail sector isn’t left behind. Many big retailers have embraced the digital platform to stay relevant. And many bricks and mortar companies are likely to switch to online sales. The S&P 500 Retailing Industry Group Index grew nearly 20% year to date.

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           Five sectors to watch in 2022. 

Source - Pixabay

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Automotive:

The automotive sector is the largest segment of US retail sales. The industry employs around 4.1 million people and contributes approximately 2.5% of the GDP.

Besides, the EV companies see a boom, supported by government policies for net-zero emissions. According to industry estimates, the US will have more than 18 million EVs by 2030. In October this year, the figure was just over 1.0 million.

Automation, ease of digital transaction, and technologies that offer a connected world experience would be the driving force behind its growth. The S&P 500 Automobiles Industry Index grew 55.81% YTD, another key indicator of the growth impetus.

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Bottomline

While 2021 saw considerable economic improvement, 2022 could be the year of rapid progress. Issues like inflation, labor and supply shortage are transitory and are unlikely to become a major impediment to the nation’s growth.

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