Rays of Hope in This Week's Economic News
While growth is likely to remain slower than usual, the risk of an outright recession now seems further out versus a month ago.
We have argued for many months that the economy was losing some momentum and showing signs of a recovery that was nearing its end. We outlined in our weekly column on June 10 the myriad sectors that were clearly slowing down. We went on to say that an aging economic recovery is more vulnerable to outside shocks.
This week we thought we might spend a little time talking about just what might go right. In many cases the good news was buried in some of this week's releases, especially the Markit Flash Purchasing Managers' Report. Though that report's headline reading for the U.S. was nothing to write home about, the report itself did suggest that wages were moving sharply higher, employment levels a little higher, and that corporations were able to selectively raise prices to cover those costs. We are careful to use the word "selective," as food, raw material prices, and energy continue to experience downward pressure. In our video this week we modified our economic forecast and officially reduced our inflation forecast. (The details of that forecast appear at the end of this report.)