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Threat of Recession is Diminished

Economists now expect a U.S. recession to occur later this year than previously forecasted after several reports point to signs of economic resiliency. "We have a hard time believing the economy is in recession today, given a strong labor market and corporate earnings growth," Tim Holland, chief investment officer at Orion Advisor Solutions told Forbes. "We also remind ourselves that recessions are uncommon, as our economy was in recession just 8% of the time over the past 30 years."

NACM's Credit Managers' Index improved in February for the first time since October with a 1.1-point jump. The main driver was a large increase in sales, but respondents in the CMI survey expressed growing concern regarding trouble collecting payments, noting that customers had tied up working capital in inventory build-ups, said NACM Economist Amy Crews Cutts, Ph.D., CBE.

"Like many other economic indicators for January, the February Credit Managers' Index, which looks back to activity in January, is showing a bit of a rebound," Cutts said. "It's nice to finally see a positive reading in the CMI, but I am cautious about reading too much into the headline number because several factors in the index continued to deteriorate. However, we cannot ignore that the Credit Managers' Index is indicating that the likelihood of recession starting in the near-term has diminished greatly."

However, the Fed continues to increase interest rates to combat inflation, which could have knock-on effects later. A recent survey by the National Association for Business Economics found a third of economists believe the recession will occur in the April-June quarter, while one-fifth believe it will occur in the July-September quarter, according to AP News.

The latest consumer inflation report shows significant amounts of spending, which will cause inflation to linger. "While the report suggests consumers got their mojo back, seasonal adjustment noise and the milder winter weather in January explain part of the strength," Gregory Daco, chief economist at EY Parthenon told AP News. "The stronger-than-expected report puts consumption on a better footing at the start of 2023 and points to positive though sluggish consumer spending growth in the current January-March quarter."

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Tuesday, 05 December 2023

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