Breaking News
Investing Pro 0
🚨 NDVA surged 43%. This AI Chipmaker Could Be Next See Analysis

U.S. Economy Shows More Strength Than Recently Forecast

By James PicernoMarket OverviewNov 04, 2022 14:16
ng.investing.com/analysis/us-economy-shows-more-strength-than-recently-forecast-138204
U.S. Economy Shows More Strength Than Recently Forecast
By James Picerno   |  Nov 04, 2022 14:16
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

In early October the near-term outlook for the US business cycle looked mildly grim and output was forecast to turn slightly negative starting in November. But after four weeks the dark estimate reversed and economic activity is again set to stay moderately positive in the immediate future. Recession risk still lurks on the horizon, but for the moment the near-term macro trend has strengthened.

The latest numbers reflect a moderately stronger trend for the US economy than previously reported by CapitalSpectator.com. On Oct. 5 I wrote that an NBER-defined recession looked set to start in November, based on forecasts for a set of proprietary indicators published in The US Business Cycle Risk Report. (The outlook was previously noted in the newsletter sent to subscribers a few days earlier.) The expected contraction was mild, virtually indistinguishable from stagnation, which was effectively a sign that the forecast was vulnerable to revision. Yet for the next three weeks the forecast held, until it didn’t.

In this week’s update (sent to newsletter subscribers on Oct. 30) the estimate for November strengthened and US output is now expected to extend its run of slow growth. He explained:

One reason for the improvement: the release of robust consumer spending data in the September report (published Oct. 28). As Bank of America CEO Brian Moynihan said last week:

“You’re seeing a mitigation of the rate of growth, not a slowdown. Not negative growth. If you raise rates and slow down the economy to fight inflation, the expectation is you have a slowdown in consumer spending. It hasn’t happened yet. So it could happen, but it hasn’t happened yet.”

The relatively firmer activity was picked up by revised forward estimates of the Economic Trend Index (ETI) and Economic Momentum Index (EMI) in the Oct. 30 update of the US Business Cycle Risk Report. After several weeks of posting November estimates below their respective tipping points (50% and 0%), new data lifted the projections, which now show this month will escape the slight contraction previously forecast.

Economic Momentum And Economic Trend Indexes
Economic Momentum And Economic Trend Indexes

ETI and EMI are calculated using a broad range of US economic and financial indicators. The track record for the indicators has an encouraging history of identifying turning points in the business cycle and the start and end of NBER-defined recession dates.

Economic Momentum And Economic Trend Indexes
Economic Momentum And Economic Trend Indexes

The recent back and forth between a mild forecast for recession and a moderate expansion highlights the challenge of the moment for US macro analysis. On several fronts the US economy has defied recent forecasts of weaker performance, due in no small part to resilient consumer spending and ongoing labor-market growth. Nonetheless, a number of warning signs are still flashing and there’s a good case for expecting that a mild recession has been delayed rather that avoided.

The combination of elevated inflation and rising interest rates are a key part of the calculus. Although the economic expansion has proved more durable than expected, the headwinds are still building and so the near-term outlook remains challenged. Estimating exactly when a recession could start, how long it will last and how far output will fall, remains ambiguous as always. Nonetheless, in the current environment, with several critical risk factors weighing on the outlook, the near-term outlook remains wobbly.

Harvard economist Kenneth Rogoff says:

“You really have to look at the world, which is in bad shape. So it’s very hard for the United States to resist that. I worry that not only we’re going to get a mild recession, I think the chances that we’ve got a significant recession are really pretty high.”

U.S. Economy Shows More Strength Than Recently Forecast
 

Related Articles

U.S. Economy Shows More Strength Than Recently Forecast

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email