US Business Cycle Risk Report - Wednesday, June 19

US economic growth has slowed recently and several key economic indicators are painting a mixed profile about the near-term outlook. The modestly wobbly numbers of late has convinced some analysts to warn that a recession is near. Perhaps, but the data overall still align with a moderate expansion and an econometric projection of the macro trend (via a broad set of indicators listed below) continues to anticipate a low probability of a downturn through July.

Short of a dramatic, sudden economic collapse in the weeks ahead, economic and financial data are telling us that it’s likely that the US economic expansion will become the longest on record next month. If growth prevails through the end of July, which appears probable at this point, output will mark 121 consecutive monthly increases – one month longer than the 120-month expansion through December 2007 (the current record holder), according to NBER’s accounting, the semi-official scorekeeper of the US business cycle.  

The main uncertainty lies beyond next month. Of course, there’s always significant uncertainty beyond a one-to-month projection window. Perhaps the uncertainty on that front is unusually high at the moment, which would explain the growing calls in some circles that a recession is virtually fate by the end of the year or at some point in 2020. Maybe, but let’s be clear: forecasts that far ahead are little more than guesses. 

As for profiling the US macro trend and restricting our analysis to high-confidence terrain, let’s start by looking at the data published to date. Using a diversified set of indicators suggests that recession risk remains low as of May, based on The Capital Spectator’s proprietary business-cycle model. Analyzing the data in the table below through this lens reflects a low probability that an NBER-defined downturn has started. (For a more comprehensive review of the macro trend with weekly updates, see The US Business Cycle Risk Report.)

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