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A U.S. Recession Is Yet To Show Clear Signals, Analysts Say

By Cristian Bustos. Originally published at ValueWalk.

Ten, longest recessions, ever

The U.S. GDP contracted 1.4% in annualized terms during the first quarter of 2022, according to an advanced estimate on Thursday. Despite concerns of a possible recession, opinions are divided among analysts as some say the country is in for a rebound, although with less momentum than in 2021, while others say the correction will arrive this year.

Revision

As reported by ABC News, some analysts believe that, once the omicron wave is over and with the almost complete resumption of activity, the U.S. economy will rebound throughout the year.

Q1 2022 hedge fund letters, conferences and more

President Joe Biden blamed the U.S. economy’s first contraction since 2020 on “technical factors,” saying employment, consumer spending, and investment remain strong.

“The American economy, powered by working families, continues to be resilient in the face of historic challenges. While last quarter’s growth estimate was affected by technical factors, the US faces its challenges from a position of strength,” the White House said in a statement.

Monthly data continue to point to uncertainty, although the risks to the economy remain significant and center around the evolution of the pandemic, the resolution of supply chain bottlenecks, and inflationary pressures. Economists will probably have to revise down slightly their U.S. growth forecast for 2022, now at 3.2%.

No Consensus

According to David Page, director of macroeconomic research at AXA Investment Managers —Axa SA (EPA:CS)— “We don’t expect growth to contract again in the second quarter, so we don’t think this will mark the start of another recession. And we lower our expectation of another contraction this year.”

“The fact that the pace of inventory correction has started earlier probably means that future growth will be more consistent during the remaining quarters of this year.”

However, Page ends with a warning to the Fed: “If this slowdown translates into a weaker labor market, that would be the exact result the Fed is trying to achieve. In that case, the Fed might not have to tighten policies so aggressively to control medium-term inflation prospects.”

According to economist Yelena Shulyatyeva, “Consumer and business spending is gaining momentum as we enter the second quarter, which we estimate will keep GDP growth above trend for the year.”

Still, For Geir Lode, director of global equities at Federated Hermes Limited, the threat looms as “The S&P 500 has fallen more than 10% so far this year and the ten-year interest rate it’s up more than 1% since the beginning of the year.”

Updated on

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