The US economy has entered recession: July’s data showed that real GDP had fallen for the second consecutive quarter. But the US still doesn't look recession-bound, thanks to resilient spending and employment figures. This leads ING’s chief international economist James Knightley to argue that "the ‘technical’ recession in the US can be brushed aside”.
Yet Knightley acknowledges that there are “more and more signs that recessionary forces are starting to feel ‘real’”, and manufacturing activity is beginning to flag. We will see data on US durable goods orders released on 24 August.
The flash US composite PMI on 23 August may show evidence of headwinds for services too. Last month’s release indicated the first contraction in business activity since the early days of the pandemic, and the downturn was led by a steep drop in service sector activity.
The Bureau of Economic Analysis releases US personal incomes data on Friday 26 August. This is a key indicator for the NBER’s Business Cycle Dating Committee, which has the power to designate a ‘true’ US recession. It will be closely watched.
The Jackson Hole Economic Symposium on 25-27 August will also see the Federal Reserve Bank of Kansas City host dozens of central bankers, policymakers, and economists from around the world. This year’s topic of discussion is vague but timely: ‘Reassessing Constraints on the Economy and Policy’.
It’s a quiet week UK data-wise, but 23 August sees the release of CIPS Manufacturing PMI and Services PMI data. Last month was a mixed bag: private sector business activity grew, but the rate of expansion was weak. On a more positive note, pressures from cost inflation eased as commodity prices began to fall, but capacity constraints from shortages of materials and staff remained a problem.
The flash eurozone composite PMI will be released next week, and expect to see further evidence of a deepening manufacturing downturn and a slowdown in the service sector.
23 August will see Eurostat consumer confidence indicator data released. Sentiment plummeted in July, and expect this month’s releases to be similarly gloomy.
The situation for Germany is particularly precarious, with Capital Economics’s chief Europe economist Andrew Kenningham expecting manufacturing conditions to get tougher. Last month's Flash Germany Composite PMI showed expectations for the future sinking to negative territory, and the German Ifo Business Climate Index fell considerably in July as higher energy prices and the threat of a gas shortage weighed on the economy. Kennington argues that “things are going to get more difficult in the second half of the year due to the energy crisis, rising borrowing costs and falling demand”.
