The Economy Is Booming

If one simply listens to the news, it is not hard to have a negative view of the market and the economy. Reviewing the data though suggests the economy is mostly on sound footing. In S&P Global’s Flash US PMI report on Friday, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence notes:

“October’s flash PMI data indicate that the US economy continues to boom at the start of the fourth quarter [emphasis added]. The output readings from the survey are consistent with GDP growing at a 5% annualized rate after a 4% expansion was signalled for the third quarter. Especially healthy corporate earnings and profits are also indicated, and hiring has surged as companies seek to boost capacity to fulfil stronger customer demand.

“If the reopening of the economy after COVID is excluded, recent months have seen the best growth spell for US businesses since early 2015.”

The entire report is a worthwhile read as it highlights growth in company backlogs, a quickening pace of employment growth and improvement in business expansion plans due to “reports of confidence being buoyed by signs of ongoing demand growth and economic resilience.’

There has been a widening gap in the Coincident Economic Indicators Index and the Leading Economic Indicators Index since mid 2022 as seen in the below chart. However, the LEI has begun to improve, and this is shown in the second chart below that highlights the 6-month percentage change in both the LEI and CEI. The LEI has now been improving since the beginning of 2025.

Lastly, the Atlanta Federal Reserve Bank’s GDPNow estimates quarter over quarter (QoQ) real GDP growth for Q3 2026 at 3.5%. This level of growth is strong and will be a rare reading if it is realized. The first reading on GDP will be reported on Thursday of this week, October 29, 2026. The consensus QoQ estimate is 3.0%.

There are certainly some headwinds facing the economy and mostly centered around inflation due to higher energy prices. All in all though, the economy continues to achieve decent, non-recessionary growth while at the same time corporate earnings growth is strong. And noting this, recession probabilities remain low.