Economy · August 4, 2022

Summarizing the topics: Recession in July?

From Goldman Sachs (A.Nathan, J.Grimberg) today:

Despite last week’s second quarter GDP release which showed growth contraction for the second consecutive quarter, triggering the rule of thumb that two quarters of negative growth constitute a recession, we don’t think the US is officially in recession. . We note that the indicators to which the NBER attributes the greatest weight to determine the monthly and quarterly peaks of the business cycle have all continued to rise, as gross domestic income increased in the first quarter and non-farm payrolls continued to grow at a steady rate. fast pace. And while labor market data historically lags behind other economic indicators, we find it would be historically unusual for the labor market to appear as strong as it currently is even at the start of a recession. We believe that the corporate financial results for the second quarter and management indications provide further evidence of continued economic expansion during the second quarter and we also find the message from the credit market fundamentals reassuring. That said, growth has slowed significantly, and as a result, we continue to expect the Fed to slow its tightening pace from here, realizing a 50bps increase in September and 25bps in November and December.

To recap, here are the key indicators followed by the NBER Business Cycle Dating Committee, plus the IHS Markit monthly GDP (formerly Macroeconomic Advisers, series followed in previous BCDC documents) in Figure 1, GDP and GDO in Figure 2 and the weekly frequency indicators in Figures 3 and 4.

Figure 1: Non-agricultural employment (dark blue), Bloomberg consensus at 8/1 (blue +), civil employment (orange), industrial production (red), personal income excluding transfers in Ch. 2012 $ (green), manufacturing and commercial sales in Ch.2012 $ (black), consumption in Ch.2012 $ (blue) and monthly GDP in Ch.2012 $ (pink), official GDP (blue bars), all logs normalized to 2021M11 = 0. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (version 8/1/2022), NBER and author’s calculations.

Figure 2: GDP (blue), GDO (red) and GDO assuming a constant of the real GDI in the second quarter of 2022 (red square), all in billions. Ch. 2012 $ SAAR, on a logarithmic scale. NBER has defined peak-to-low recession dates shaded in gray. Source: BEA, NBER and author’s calculations.

Figure 3: Lewis, Mertens and Stock Weekly Economic Index through July 23. Source: FRED

Figure 4: Baumeister et al. Weekly indicator of state economic conditions until 25 June.

What to think of the argument that the United States entered a recession in the January-April period? I remain (very) doubtful.