As we close out the week, it’s a good time to assess recent data. In a nutshell, it’s been positive. Based on what we’re seeing, the economy continues to grow. Of course, there are still scary headlines, fears, and real risks to contend with. But the data is showing a resilience that no one expected. This is a good sign, but what does it mean for the chance of recession this year? Let’s take a closer look.
Consumers Are Confident and Spending
The most important data this week was a significant jump in consumer confidence. The Conference Board survey came in much higher than both last month and expectations, and it is now at a two-year high. Consumer confidence is a key metric to follow, as we don’t get a recession when people feel good—which they do.
Beyond feeling good, consumers can spend more because they are making more money. Personal income rose by 0.3 percent in June, driving spending up even more.
Economic Growth Beats Expectations
June was typical of the last quarter, as economic growth clocked in at 2.4 percent, faster than the first quarter and well above expectations. Growth has accelerated so far this year, which gives us a very solid foundation for the next couple of quarters. Even with that growth, personal consumption expenditures (PCE) inflation continued to drop, suggesting we could see further drops even as growth continues.
Fed Expects a Slowdown (Not a Recession)
The Fed, however, may not be convinced. As expected, it raised rates by another quarter-point at its regular meeting this week. The real takeaway, though, was that the Fed’s staff no longer expects a recession this year. So even the Fed, which is raising rates to slow the economy, doesn’t expect anything more than a slowdown. Despite the headwind of higher interest rates, the Fed is noting the same things we have here, with higher employment and spending, and belatedly drawing the same conclusions.
A Good News Week
That is what mattered this week: lots of good data and even the Fed shifting away from a recession call. It’s a nice send-off to a summer weekend.
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