Continued slower-than-usual growth in the U.S. economy has raised concerns about a possible recession, according to a report from Macquarie on Tuesday.
While there has recently been a shift from recession fears to more optimistic outlooks thanks to better-than-expected economic reports, the investment firm warns that these bullish forecasts may be too early.
Macquarie analysts note that the US economy is experiencing “a sustained phase of slower-than-usual growth, driven by tighter monetary policy, borrowing restrictions and a decline in the additional savings accumulated during the pandemic.”
It is said that although the economy appears strong at the moment, it is still at risk of recession if an unexpected financial event occurs.
The conflicting signals coming from the economy are evident in the recent reactions of the financial markets.
Macquarie notes that weak economic news in July and early August raised fears of an approaching recession, sending stock values and U.S. Treasury yields lower.
But since August 5, more positive news has restored confidence and the US economy is strong and robust again.
However, Macquarie believes that a “balanced view” is more appropriate. According to this view, the US will continue to experience slower-than-usual growth, but will not slide into a deep recession unless an unexpected financial event occurs.
The report notes that this pattern of slow growth is common after a long period of tight monetary policy.
The report highlights that the services sector, which showed some signs of recovery in July, has yet to stabilize. The ISM Services Index, a key economic gauge, points to weak growth, similar to trends seen before the recessions of 2001 and 2007.
Macquarie concludes that the future direction of the economy will depend largely on the actions of the Federal Reserve and the possibility of unexpected financial events, which could help maintain stable growth or push the economy into a downturn.
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