Title: U.S. Recession Probability Surges to 68% in First Half of 2024: What Investors Need to Know
As the world's best investment manager and financial market journalist, I bring you the latest insights on the increasing likelihood of a U.S. recession. According to a machine learning model developed by Piper Sandler, the probability of a recession has surged to 68%, driven by sluggish economic indicators in the first half of 2024.
The report highlights alarming figures such as real GDP growth of just 1.4% in the first quarter and consumer spending rising by only 1.5%. Second-quarter estimates are not much better, with projections of around 1.5% for GDP growth and just over 1.0% for consumer spending. These numbers point towards a broad economic slowdown, exacerbated by rising unemployment and stagnating consumer spending.
One key indicator to watch is the Sahm Rule recession signal, which is nearing its trigger point. As of June, the unemployment rate increased by 0.43 percentage points over a three-month average, approaching the 0.50 percentage point threshold that typically signals a recession.
The report also points to rising bankruptcy rates, a struggling manufacturing sector, and slowing consumer spending. Economists warn that these indicators are typically associated with recessions, not just a soft landing.
From a GDP perspective, retail sales have stalled, with restaurant sales seeing a decline due to a fast-food price war among major chains. Spending on hotels and airfares has also cooled, with any reported strength in services coming from non-cyclical sectors.
Consumer spending headwinds are evident, with employment slowing and downward revisions to payroll figures. Capital expenditures are another concern, with signs indicating a decline in core capital goods orders and nonresidential construction.
Economists also point to potential price declines in the housing sector and the stalling of federal and state support for GDP growth. As an expert in the financial markets, I advise investors to closely monitor these economic indicators and consider adjusting their investment strategies to navigate the potential challenges ahead.
In conclusion, the increasing probability of a U.S. recession should serve as a wake-up call for investors to reevaluate their portfolios and make informed decisions to protect their finances. By staying informed and proactive, investors can mitigate risks and position themselves for success in uncertain economic times.