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Recession fears overdone

The surge in interest rates, plunge in the stock market and weakness of consumer confidence have fuelled fears of an impending recession, but there is still little sign of that in the incoming economic data. The coincident indicators used by the NBER to identify economic turning points show continued growth. The strength of payroll employment growth, which is averaging close to 400,000 per month, is particularly hard to square with claims that a recession is imminent. Admittedly, with inflation rampant, that is likely to keep the Fed raising interest rates aggressively, including another 75bp hike in July. But with underlying demand still strong, a slowdown in growth is still the more likely outcome.
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US Data Response

Industrial Production (Jul.)

The 0.6% m/m rise in industrial production in July was much stronger than we expected and provides another clear sign that the economy is still in expansionary territory. That said, the likely drag on manufacturing from the impending global economic downturn means that the resilience of production may not last for long.

16 August 2022

US Economics Weekly

More good news on inflation coming soon

The drop back in CPI inflation in July wasn’t enough alone to convince Fed officials to change their plans for interest rate hikes. But we expect the better news on inflation to continue over the coming months, which will eventually persuade the Fed to halt its tightening cycle early next year.

12 August 2022

US Economics Update

Is there really such thing as a ‘jobful’ recession?

While history shows that recessions can begin even while employment is still rising, the current rate of payroll employment growth is far too strong to be consistent with an economic downturn. By the same token, although we think an outright contraction will be avoided, any recession over the next couple of years would almost certainly coincide with a decline in employment and rise in the unemployment rate.

11 August 2022

More from US Economics Team

US Economics Weekly

Recovery to slow from here

The slightly disappointing second-quarter GDP data released this week and another dovish press conference from Chair Jerome Powell strengthen our belief that the Fed is unlikely to begin tapering its asset purchases until early next year.

30 July 2021

US Data Response

ISM Manufacturing Index (Jun.)

Although the ISM manufacturing index didn’t fall as far as feared in June, the decline in the more forward-looking new orders component suggests the worst is still to come.

1 July 2019

US Economics Weekly

Any G-20 trade truce unlikely to last

If the meeting between Presidents Trump and Xi at the G-20 tomorrow is successful, we would expect both sides to agree to resume negotiations and hold off on imposing new tariffs. But, given the fundamental differences between the two sides, we expect that any truce will ultimately break down later this year, with tariffs eventually being levied on all imports from China.

28 June 2019
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