Research Briefing | Jun 26, 2024

Recession Monitor – Economy recovering from Q1 stumble

The economy slowed following the strong gains in the second half of last year, as it settled into a more sustainable growth pace. However, our business cycle indicator shows that growth improved midway through the second quarter and corroborates our expectations for Q2 GDP to rise about 2% at an annualized rate. Strong consumer spending, underpinned by a gradually loosening labor market, should ensure the economy steers clear of any recession in the near term.

What you will learn:

  • Consumer sentiment matters at turning points in the economy, but we believe the current bout of downtrodden sentiment overstates the underlying health of the consumer. Hard data points toward consumption growth near 2% in Q2.
  • The housing market is struggling with elevated mortgage rates, builders reticent to build, and would-be buyers on the sidelines. Although, housing accounts for only a small share of GDP and the weakness in residential investment has not translated into layoffs in construction.
  • As Federal Reserve rate cuts come into view, this picture should drastically change and activity should resume. Encouragingly, the slowdown will have little impact on employment, with a backlog of construction supporting residential employment and fiscal policy supporting nonresidential employment.
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