Recent analyses indicate a downward trend in economic growth, with projections suggesting a continuation into April. The Capital Spectator’s evaluation of the three-month average of the Chicago Fed’s National Activity Index (CFNAI-MA3) points to a potential decline in the Fed’s business cycle benchmark. Tomorrow’s report for the initial month of the second quarter is anticipated to reflect a slight drop in this index. The average forecast for CFNAI-MA3, derived from multiple econometric estimates, predicts a gentle decrease to -0.25, a figure that is marginally lower than March’s -0.18 reading. Although this -0.25 projection remains a safe distance from the threshold that signifies the onset of recessions, it still indicates below-trend growth for the US economy.
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The US economy appears to be moving at a sluggish pace, raising concerns about the possibility of an impending recession. Nonetheless, the current figures do not align with overly pessimistic expectations. Based on available data, the likelihood that April marked the beginning of an NBER-defined downturn remains very low. Data projections indicate that the US is likely to evade a significant macroeconomic downturn. Although there is potential for a shift in outlook should future data falter, the current recession risk remains minimal.
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● US home construction rebounded sharply in April | MarketWatch
● US industrial output increased in April, driven by higher utility demand | CFO
● Inflation in the US rose in April at the fastest rate in three years | MarketWatch
● Strong US data enhances growth prospects for the second quarter | Reuters
● GDPNow Q2 GDP estimate for the US ticks down to +2.5% | Atlanta Fed
● Redbook: US retail sales increased by 0.5% YoY halfway through May | TradingEcon
● Fed officials indicate the possibility of several rate hikes in 2016 | Reuters
● Concerns over rate hikes in the US drag down stock prices | Fox Business
In April, US housing starts and industrial activity experienced significant increases, surpassing expectations. However, this positive news is overshadowed by negative trends in year-over-year data. In the housing industry, the shift toward a negative trend is evident—new residential construction and newly issued building permits both fell for the first time in 13 months in comparison to the same period last year. While industrial output also rebounded robustly in April with a better-than-expected increase of 0.7%, this improvement did not suffice to reverse the downward trajectory seen in year-over-year terms. Consequently, industrial activity in the US has continued to contract when viewed on an annual basis since last September.
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The gap between long- and short-term Treasury yields has been narrowing in recent weeks, a development that some analysts interpret as a concerning sign for US economic growth. While the overall numbers indicate a potential decline in the macro trend, there remains significant apprehension regarding the persistently slow pace of growth. The question looming is how slow it can become before officially tipping into a recession. The flattening yield curve has gained attention, particularly amid fluctuating stock prices and mixed economic signals.
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● NAHB Index remains stable in May, signaling consistent growth in housing | WSJ
● NY Fed Manufacturing Index saw a sharp decline in May | MarketWatch
● Corporate bonds significantly outperform Treasuries in 2016 | Bloomberg
● Oil prices approach a six-month high supported by outages | Reuters
● Understanding the economic root of the current discontent | WaPo
Economists anticipate positive growth in the upcoming April reports on residential housing construction and industrial output in the US. While consensus forecasts suggest an optimistic start to second-quarter data, the year-over-year comparisons are still expected to remain negative.
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On Friday, the governor of the Bank of England cautioned that the UK might face an economic recession if citizens opt to leave the European Union (EU) in the forthcoming referendum. Mark Carney forecasted at a news conference that such a scenario could lead to a material slowdown in growth, an increase in inflation, and a complex set of challenges. Is this prudent advice from a level-headed central banker, or are critics right to label it an inappropriate attempt to influence a democratic discussion by involving an institution that should ideally maintain its neutrality?
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Last week saw a strong rebound in broadly defined commodities, which emerged as the top performers among the major asset classes, according to various proxy ETFs. The iPath Bloomberg Commodity (DFP) gained 1.4% over the five trading days ending May 13, a notable increase compared to the rest of the field.
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● US retail sales increased by 1.3% in April, marking the largest gain in a year | MarketWatch
● US Consumer Sentiment Index reached a one-year high in May | Bloomberg
● US business inventories rose more than anticipated in March | RTT
● GDPNow Q2 growth estimate for the US increased to +2.8% | Atlanta Fed
● NY Fed nowcast for US GDP growth in Q2: +1.2% | NY Fed
● China’s industrial production and retail sales grew less than expected in April | RTT
● Yes, the IMF and over 200 economists can be incorrect | R. Bootle (Telegraph)
In the analysis of recent economic trends in the United States, several key indicators reveal a landscape of cautious growth amidst emerging uncertainties. As various metrics suggest a potential slowdown, it is essential to delve into the data to understand the implications for both the economy and policy decisions.
In conclusion, while the current economic outlook presents challenges, there are also signs of resilience and potential growth in specific sectors. Monitoring these indicators will be crucial in navigating the future economic landscape.
