On Tuesday, Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, appeared on Bloomberg TV once again. He reiterated his belief that the United States entered a new recession last year. Achuthan argued that the current figures do not paint an accurate picture of economic conditions. He believes that upcoming data revisions will eventually align with his perspective on the business cycle and provide clarification.
The Bureau of Economic Analysis reports that US GDP grew by 1.7% (real seasonally adjusted annual rate) in the second quarter of this year. This growth rate exceeded expectations significantly, with economists anticipating only a 1.0% growth. Notably, this “advance” GDP estimate closely aligns with The Capital Spectator’s earlier average Q2 nowcast of 2.0%, which was published on Monday. Additionally, nonfarm private payrolls reportedly increased by a net of 200,000 in July, as indicated by the ADP Employment Report. This increase surpasses the consensus forecast by economists, contributing to the evidence that modest growth remains a dominant trend.
According to predictions based on The Capital Spectator’s average econometric outlook, the ISM Manufacturing Index is anticipated to rise to 51.3 (moderately above the neutral reading of 50.0) when the update for July is released. This estimate reflects a slight increase from the previously reported 50.9 in June, although it falls short of several consensus predictions derived from economist surveys.
The Economist warns that while the slowdown in emerging markets should not be viewed as a prelude to an economic collapse, it signifies a critical juncture for the global economy. Growth rates are likely to decline in China and other emerging markets. Some analysts are interpreting this realistic outlook as heralding the end of an era, claiming we’ve passed a point of no return for the global economy and international investments. However, the situation is less dramatic than presented. As Barry Ritholtz notes, a narrative risk may exist as well. If viewed through certain recent media lenses, the prospects for emerging markets may appear dire, at least momentarily.
The latest average econometric nowcast from The Capital Spectator indicates that US GDP is expected to increase by 2.0% (real seasonally adjusted annual rate) in the second quarter of this year. This forecast is slightly revised down from a previous estimate of 2.1% for Q2, which was published on June 21. The government’s initial Q2 GDP estimate will be released on Wednesday, July 31.
● When the Money Runs Out: The End of Western Affluence
By Stephen D. King
Summary via publisher, Yale University Press
In the past six decades, the Western world has seen remarkable economic progress, so much so that continuous growth seems normal. However, economist Stephen D. King warns that this period of rising living standards is an historical exception. Current stagnation within Western economies could soon escalate into a crisis. Following his earlier work, Losing Control, King provides a candid diagnosis of the West’s current situation, declaring that we are not only witnessing the end of a prosperous age but also facing promises—like pensions and healthcare—that may exceed tomorrow’s available resources.
MIT economics professor Rudiger Dornbusch famously noted in 1997, “None of the U.S. expansions of the past 40 years died of old age; every one was murdered by the Federal Reserve.” This view is widely supported by research linking inverted yield curves to economic downturns. The real question remains whether the history surrounding the business cycle and monetary policy leading up to the Great Recession of 2008-2009 still has relevance today. Specifically, how likely is it that future recessions will stem from decisions made by monetary authorities, intentionally or otherwise?
A recent study by the Bank for International Settlements (BIS) casts doubt on the effectiveness of commodities as a means of diversifying investment portfolios. The key finding suggests that “the correlation between commodity and equity returns has significantly increased since the onset of the recent financial crisis.” While some experts interpret this study as a case for avoiding commodities altogether in asset allocation strategies, such a conclusion may be overly simplistic.
The preliminary estimate of Markit Economics indicates that the US manufacturing sector experienced a moderate acceleration in July, as reflected in their purchasing managers index (PMI). Markit’s Chief Economist Chris Williamson remarked, “The U.S. manufacturing sector gained momentum in July, with improvements in output, order books, and employment.” He added that the upswing in the goods-producing sector likely points to an increase in GDP growth for the third quarter after a potential slowdown in the second quarter.
Economic conditions in the United States demonstrate signs of stabilization in July, following a sharp but brief decline in June. The Macro-Markets Risk Index (MMRI) indicates a recovery from the deterioration that persisted for most of last month. After closing at 10.1% on July 23, the index suggests that business cycle risk remains low, notwithstanding the fall experienced in June. Although the MMRI remains near its lowest level in a year, it stays above the danger zone of 0%. Readings above 0% indicate economic growth; a drop below 0% would signal that recession risks are elevated.
This revised article enhances readability while maintaining the original message and structure.
