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Weekly Economic & Financial Commentary: Not Yet a Recession Way Down Inside

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Summary

United States: Busy Data Week Shows Wobbling U.S. Economy

  • Data released this week showed that U.S. economic growth modestly contracted in Q2. New home sales were yet another data release that pointed toward a cooling housing market. The FOMC continued its fight against elevated inflation with its second consecutive 75 bps increase in the federal funds rate.
  • Next week: ISM Manufacturing (Mon), Trade Balance (Tue), Employment (Fri)

International: The Global Economic Outlook Dims

  • Over the past several months, concerns about the global economic outlook have intensified, and predications of possible recessions around the world have become more widespread. As a result, we recently further downgraded our outlook and now expect global GDP growth of just 2.3% in 2022 and 1.6% in 2023.
  • Next week: RBA Cash Rate (Tue), BCB Selic Rate (Wed), BoE Bank Rate (Thu)

Interest Rate Watch: FOMC Hikes by 75 bps and Indicates More to Come

  • Not only did the FOMC raise its target range for the federal funds rate by 75 bps, which was widely expected, but it signaled that more tightening is likely. That said, the FOMC acknowledged the recent slowdown in economic activity.

Topic of the Week: Not Yet a Recession Way Down Inside

  • Real GDP posted back-to-back declines in the first two quarters of 2022. While two consecutive quarters of negative GDP growth is one working definition of recession, it is not the official one. In a recent report, we unpacked the right variables to watch and introduced a new at-a-glance tool to get the next recession call right.

Full report here.

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