Features

The US economic downturn: it’s only a matter of time

With the US economy facing headwinds from trade wars to slowing global growth, talk of a recession is picking up.

935_MW_P04_Markets_Bottom

"Talk of a possible recession is picking up," say Scott Lanman and Katia Dmitrieva on Bloomberg. The US economy is facing headwinds, from trade wars to slowing global growth. The US central bank, the Federal Reserve, has already U-turned on raising interest rates, which has given stocks a boost. But "the bond market is a different story", says Patti Domm on CNBC.US Treasury yields remain surprisingly low, implying investors fear a slowdown more than rising inflation.

"It seems like there has to be an elevated probability of a recession this year or next," argued Nobel Prize-winning economist Robert Shiller at a recent panel discussion at the Inside ETFs conference in Florida. Most economists still expect positive growth for this year, but more than three quarters of corporate chief financial officers expect a recession by the end of 2020.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

There are certainly some concerning signs in the data. US industrial production fell by 0.6% in January. The decline "suggests a clear cooling at US factories that could prompt a slower paceof growth this year", reports The Washington Post. And in December, retail sales plunged by 1.7%, notes Michael Pearce of Capital Economics. Such a severe slide may need to be taken with a pinch of salt,but even if spending rebounds, consumption growth "is on track to slow sharply in the first quarter", says Pearce.

Meanwhile, companies have been warning of weaker revenues and profits as the sugar high from Donald Trump's tax cuts starts to wear off. For example, Coca-Cola expects sales growth of 4% this year, down from 5% last year, reports the Financial Times. Regardless of whether a recession hits shortly or further into the future, US stocks don't look to be pricing in any upsets that could lie ahead.

Advertisement

Recommended

Visit/519858/how-long-can-the-good-times-roll
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Visit/516944/why-wall-street-has-got-it-wrong-again
Economy

Why Wall Street has got the US economy wrong again

The hiring slowdown does not signal recession for the US economy. Growth is just moving down a gear, says Brian Pellegrini.
25 Oct 2019
Visit/economy/inflation/600799/federal-reserve-inflation-money-printing
Inflation

Here’s why the Federal Reserve might print more money before 2020 is out

The Federal Reserve wants to allow US inflation to run “hot” for a while. But that’s just an excuse to keep interest rates low – and possibly print mo…
10 Feb 2020
Visit/economy/us-economy/600747/its-still-inflation-or-bust-as-far-as-the-fed-is-concerned
US Economy

It’s still “inflation or bust” as far as the Fed is concerned

The latest interest-rate meeting of the US Federal Reserve has confirmed what markets already knew – central banks are pursuing "inflation or bust” po…
30 Jan 2020

Most Popular

Visit/economy/uk-economy/600824/how-the-bbc-can-survive-the-end-of-the-tv-licence
UK Economy

How the BBC can survive the end of the TV licence

Th TV licence that funds the BBC is looking way past its sell-by date, says Matthew Lynn. Here's how it could survive without it
16 Feb 2020
Visit/economy/uk-economy/600837/rishi-sunak-new-chancellor-spending-splurge
UK Economy

Britain has a new chancellor – get ready for a major spending splurge

The departure of Sajid Javid as chancellor and the appointment of Rishi Sunak marks a change in the style of our politics. John Stepek explains what's…
14 Feb 2020
Visit/investments/property/600826/living-on-a-houseboat-the-pros-and-cons-of-a-floating-home
Property

Living on a houseboat: the pros and cons of a floating home

Living on a houseboat sounds romantic and peaceful. But it’s not as straightforward as it looks, says Nicole Garcia Merida
14 Feb 2020
Visit/investments/commodities/600729/the-rare-earth-metal-that-wont-be-a-secret-for-long
Sponsored

The rare earth metal that won't be a secret for long

SPONSORED CONTENT – You can’t keep a good thing hidden forever; now is the time to consider Pensana Rare Earths and the rare earth metals NdPr.
31 Jan 2020