We said in our Investment Outlook at the start of the year that we believed the chance of a US recession would be a main talking point this year. We still do. Our own recession indicator is reaching high levels, and when that’s happened in the past, a US recession hasn’t been far away.
Factors behind this include a drop in building permits and a weak outlook for consumer spending and manufacturing in America. Something we’re keeping a particularly close eye on is the US unemployment rate though. It remains pretty low at the time of writing, but if it rises, that could seal the deal of a recession.
There is a chance we’ll see a significant delay to a recession starting, or even a recovery without one, if the US labour market stays strong. With an eye on the upcoming presidential election next year, the US government may well want to protect the economy and contain job losses.
However, while this can’t be ruled out, the reality is it would be very difficult to engineer while still keeping inflation under control, which remains a declared aim of central banks and governments.