Is the US due for a recession or not? Will America’s economy get dragged into recession? headlined the financial press after January 2016 has been the worst January for US stock markets since 2009. Analysts warned that US recession odds rose from 20 to 40% in just weeks given both the disappointing world growth forecast and the weak data from the US economy.
Deutsche Bank’s chief US economist, Joseph LaVorgna, told CNBC that odds of recession grow proportionally to stock markets’ decline. The US economy’s growth slowed in the Q4 2015 to a mere 0.7% annual rate and the US manufacturing sector contracted for the 4th straight month in January 2016. The issue is that in a deteriorating world economy, the US remains likely the last strong driver for growth and therefore the lone evasive action against global recession.
Several months ago, many people affirmed the Chinese economy’s slowdown wouldn’t impact the US economy. Considering globalization and available data, one can agree with the Financial Times which wrote the risk of US recession is (indeed) back on the agenda for markets. Will the Fed decide the outcome?