Is A Global Recession Approaching?

Despite this evidence of a new global malaise, there are still those that continue to expect the US economy to “ride to the rescue” over the next few months, particularly following what, at first sight at least, appeared to be not only firmer employment data but also an apparently reasonable retail sales report earlier this month.

Since those data points, it has been be relatively easy for many to talk about the US’s “second half economy” gathering pace once again. If we observe the retail sales data in levels terms, though, we can see that the data has downshifted quite significantly over recent months and that, relative to its post-GFC trend, the data is now almost as weak as it has been at any time since the crisis.

Moreover, both the latest GDP data and, more importantly, the industry-specific series point to the existence of what has become a significant inventory overhang within the economy that will likely reduce rather than boost growth in the second half of the year.

We calculate that it is quite possible that the inventory term could knock a full percentage point off the second half of the year’s growth rate.