The global macroeconomic imbalances are harbingers of an imminent crisis. Or maybe not. Every time the vitality of the US economy wavers, even for reasons that are purely cyclical or seasonal, voices begin to sound the alarm in unison: “Is the USA heading back into recession?” “America and the spectre of recession”, “The United States has stalled”. Such headlines have appeared in newspapers all around the world on countless occasions. Nevertheless, examining the fundamentals, it is clear that although uneven and fragile, economic growth in the US is not in doubt.
“The probability of a recession in the next 12 months is around 30%”, was J.P. Morgan’s response in mid-May to macroeconomic analysts speculating about a slowdown of the United States’ GDP. The Anglo- Asian HSBC, Bank of America Merrill Lynch, and Goldman Sachs were all in agreement. “The possibility exists for a contraction of current levels, but a recession is ruled out”, was the comment made by the economists of Goldman Sachs at the beginning of May. They know that historically the first quarter of the year is not the best indicator of the health of the US economy. Generally speaking, the two most defining quarters have been the third and fourth.
There are three reasons for optimism about the American economy in the coming 12 months. The clear pattern of unevenness in the economic growth of the United States is levelling out. As was highlighted in the Federal Reserve’s latest beige book, formally called the “Summary of Commentary on Current Economic Conditions”, even areas that were struggling to hitch their wagons to the recovery of the manufacturing sector seem to have finally gotten back on the right track. The most significant boosts can be seen in the Rust Belt, a region that stretches from New York to Illinois and Wisconsin. “There is still much to be done, the creation of jobs is still wavering, but we cannot fail to be optimistic about the future after years of recession and increasing inequality”, a senior economist from the Federal Reserve said to Eastwest. If the data trend relating to the Rust Belt continues for the rest of the year, those who have predicted a recession due to falling domestic demand will be proven wrong.
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The global macroeconomic imbalances are harbingers of an imminent crisis. Or maybe not. Every time the vitality of the US economy wavers, even for reasons that are purely cyclical or seasonal, voices begin to sound the alarm in unison: “Is the USA heading back into recession?” “America and the spectre of recession”, “The United States has stalled”. Such headlines have appeared in newspapers all around the world on countless occasions. Nevertheless, examining the fundamentals, it is clear that although uneven and fragile, economic growth in the US is not in doubt.
“The probability of a recession in the next 12 months is around 30%”, was J.P. Morgan’s response in mid-May to macroeconomic analysts speculating about a slowdown of the United States’ GDP. The Anglo- Asian HSBC, Bank of America Merrill Lynch, and Goldman Sachs were all in agreement. “The possibility exists for a contraction of current levels, but a recession is ruled out”, was the comment made by the economists of Goldman Sachs at the beginning of May. They know that historically the first quarter of the year is not the best indicator of the health of the US economy. Generally speaking, the two most defining quarters have been the third and fourth.
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