Are we heading into a recession in the united states?

recession, usa


      Us PMI data entered the contraction phase for the first time in three years since September-2016, as announced by ISM manufacturing PMI today for august survey.
This downside trend as mentioned in the chart reflects the lack of optimism among purchasing managers in the manufacturing field. as a leading indicator it anticipates a continued slow in industrial production in third and fourth quarter of 2019.

ism manufacturing PMI


     Regardless of what officials and central bankers say about the strength of job market in the United States.
If we take a critical look at the data, we could observe an upward trend in the initial jobless claims (which is a leading indicator for the job market) from -5.3% YoY in January 2019 to -0.1% in august.
The change is expected to be positive in September which means adding more unemployed people than what we had last year. Thus, the unemployment rate has already reached its bottom at 3.6% and starts an upward reversal.
Also, in terms of NFP data, we observe a decreasing momentum (on a year on year basis) since its peak in January 2019, now in July the United States is adding less people to the work force than one year ago. And we expect a further downside momentum in 3d and 4th quarter 2019.

initial jobless claims

non farm payroll (NFP)

    Second revision of US GDP has been slightly to the downside from 2.06% to 2.04%.
Generally, the US economic growth rate is still - to some extent- resilient, compared to other parts of the developed world. But if we dig into the details of its major components, we realize a decline in trade balance along with domestic investments. Those declines were offset by a positive contribution from Personal Consumption Expenditure, and GOVERNMENT spending.  

U.S GDP components

   Looking at households’ income & expenditures data (as mentioned in the chart) we see a sort of convergence pattern between REAL DISPOSABLE PERSONAL INCOME & REAL PCE ; an increase in consumption growth rate compared to a decline in real disposable income. The reason behind that is that American people are spending greater than what they get. Which is an unhealthy economic situation, especially when it is the major standing supporter for US economy right now.

U.S households’ income & expenditures (pce)


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