Another economic analysis has concluded that a recession is not in America’s near future.
The Economics Group at Wells Fargo Securities says it raised the R question after a widely watched assessment of manufacturing activity came up with bad news two months in a row.
Those gloomy reports from the Institute of Supply Management already lead Gluskin Sheff + Associates Inc. chief economist David Rosenberg to issue a report waiving off recession worries. He says consumers will pull U.S. through.
At Wells Fargo, economists Tim Quinlan and Sarah House noted that similar regional readings on manufacturing have been ugly even longer. And other “hard data,” such as industrial production and factory orders, add to the sense that manufacturing might be in a recession, their report said.
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This is important because if manufacturing is in a recession, the rest of the economy might not be far behind. Wells Fargo’s report notes that “manufacturing recessions have historically led economy-wide recessions.” It said a recession in manufacturing preceded the last two U.S. recessions by 11 and four months, respectively.
But a broader recession has not always followed a manufacturing recession.
The two economists found that manufacturing recessions hit in 2003 and in 1985-86 without the rest of the economy following along.
“In each of these occasions, the broader economy continued to expand despite the headwinds confronting the manufacturing sector,” they wrote.
Also, they reported, U.S. manufacturing activity had fallen flat several times – in 1993, 1996, 1998 and 2012-13 – without even a manufacturing recession developing.
And “flat” essentially is where they say manufacturing is now. Not in a recession all its own.
They based this conclusion on a deeper dive into manufacturing data on employment, production, income and sales – the same four factors the National Bureau of Economic Research uses in its official determination of whether a broad U.S. recession has happened.
“On that basis the rampant concerns about a manufacturing led recession are overblown, at least at this point, in our view,” Quinlan and House concluded in their report.