End of Recession Cues, Recovery Blues

by: Market Blog

Capital Economics believes that there is a 100 per cent chance that the U.S. recession ended in July, and there is an 88 per cent chance that it actually ended a month before that.

According to the firm’s recovery index, all 28 of the indicators that tend to lead the economy out of recession are now higher than the trough reached earlier in the business cycle – conditions that exceed those seen during recoveries from the previous nine recession.

That is, the indicators are flashing recovery. Industrial production was the last indicator to turn, after it improved in June.

“This is particularly significant as it is one of the four monthly variables that the NBER uses to date the business cycle,” Capital Economics said in a note, referring to the National Bureau of Economic Research , the organization that gives the official word on recessions and recoveries.

However, Capital Economics isn’t upbeat on what the recovery will look like:

The U.S. is unlikely to enjoy a strong recovery. Although there are signs that progress is being made in the industrial and housing sectors, there are very few signs of recovery in the consumer sector. As long as households remain in the doldrums, the wider recovery will be subdued.