Despite initial predictions of a recession, the U.S. economy has experienced unexpected growth, with high consumer spending and continued borrowing and investment by businesses being key factors.
The U.S. economy continues to grow above-trend, consumer spending remains strong, and the labor market is tight; however, there are concerns about inflation and rising interest rates which could impact the economy and consumer balance sheets, leading to a gradual softening of the labor market.
Recent profit reports from companies such as Amazon, Walmart, and Home Depot, along with other consumer statistics, indicate that the case for a 2023 recession is weakening, as the consumer economy shows resilience with rising real incomes, substantial savings, and continued spending in sectors like automobiles and services.
Orders for long-lasting goods in the US rose in July for the third consecutive month, indicating a potential stabilization of the struggling industrial side of the economy, if the fluctuations caused by Boeing orders are excluded.
U.S. manufactured goods orders experienced a significant 2.1% decline in July, the first drop in four months, due in part to higher interest rates impacting business equipment spending.
The US saw a 54% increase in bankruptcies in August, with small and mid-cap companies being hit the hardest, as the Federal Reserve's aggressive interest rate hikes and higher borrowing costs continue to take a toll on businesses.
Rising U.S. business bankruptcies are causing concern despite strong economic indicators, potentially impacting the overall economy and smaller firms in particular.
The US manufacturing industry is experiencing a "manufacturing boom" with increased construction spending and rising investments, but concerns remain over weakening demand and the potential impact of higher interest rates on economic growth.
The US economy is facing a looming recession, with weakness in certain sectors, but investors should not expect a significant number of interest-rate cuts next year, according to Liz Ann Sonders, the chief investment strategist at Charles Schwab. She points out that leading indicators have severely deteriorated, indicating trouble ahead, and predicts a full-blown recession as the most likely outcome. Despite this, the stock market has been defying rate increases and performing well.
Retail sales in the US remained resilient in August, with a 0.6% month-on-month increase, surpassing expectations of 0.2%, indicating a positive trend for the economy.
U.S. retail sales rose more than expected in August due to higher gasoline prices, but underlying spending on goods slowed as Americans faced increased inflation and borrowing costs, while the trend in underlying spending on goods was not as robust as initially thought in July. Despite this, overall consumer spending is expected to remain strong, driven by spending on services.
U.S. business activity remains sluggish in September, with the services sector hovering at its slowest pace since February and new order activity hitting its lowest level of the year, according to a survey by S&P Global, which also indicated that job growth and consumer spending have held steady despite concerns over interest rate hikes and inflation.
The U.S. labor market's strength may be at risk as the Federal Reserve's projected interest rate hikes could lead to a slowdown and increased consumer debt, potentially pushing the economy towards a recession.
The U.S. trade deficit decreased by 10% in August, reaching a nearly three-year low, which could potentially indicate a change in consumer spending habits and emerging economic weakness. However, smaller deficits contribute positively to GDP growth, and the declining trade gap may boost the third-quarter GDP by 4% or more.
U.S. business output grew in October as the manufacturing sector rebounded from a contraction, and services activity increased, indicating that the economy is withstanding rising interest rates and inflationary pressures.
Orders for durable goods jumped 4.7% in September, largely due to new contracts for Boeing airplanes, while overall business investment rose strongly, signaling a possible rebound in the manufacturing sector and business equipment spending in the last quarter of 2023.
