Good European data bolster hopes of avoiding recession

recession

Portocolom AV | The US index of leading indicators, which hit a new low on Monday 23rd, seems to indicate that the US economy will enter recession in 2023. This indicator, which includes key economic data with the aim of predicting the rate of growth, has historically had a very high success rate in anticipating recessions. This has been the case in previous crises, such as the Covid-19 crisis, the 2008 mortgage crisis, and the dotcom bubble in 2001, among others.

On average, the indicator anticipated a recession seven months in advance. Based on these data, and if history repeats itself, a recession in the US would start after the summer and could last approximately nine to twelve months. According to the Conference Board, the agency in charge of its publication, the data suggest that there will be a deterioration in conditions in labour markets, manufacturing, housing construction, and financial markets in the coming months and “overall economic activity is likely to turn negative in the coming quarters before recovering”.

In the eurozone, good data strengthen expectations of avoiding a recession. January’s composite PMI came in at 50.2, slightly higher than expected and just above the 50 mark, indicating an expansionary phase of the economic cycle. If we break this data down, the manufacturing PMI for the eurozone came in at 48.8 while the services sector came in at 50.7. These data indicate that sentiment in Europe continues to improve and is at a seven-month high. Positive data from an economic activity point of view, coupled with comments from European Central Bank members on high inflation suggest that interest rates may rise in Europe more than the market may discount.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.