No Recession ... Yet | May 2023

The economy grows, large stocks take the lead, bonds find their footing and I-Bond yields drop. Plus, an article roundup and the IVA Factor Tracker.

The Bureau of Economic Analysis’s first estimate, released at April’s end, is that our economy—measured by gross domestic product (GDP) adjusting for inflation—grew 0.3% during the first quarter. (The headline 1.1% figure you see bandied about in the press is an annualized number.)

Over the past 12 months, the economy has expanded 1.6% after inflation. Add inflation into the equation and the U.S. economy was 7.3% larger at the end of March than it was one year ago.

I told you in my 2023 outlook, Just Keep Going, that I expected the U.S. economy would enter a recession this year. That’s still my base case scenario because none of the factors I was watching in December have changed.

To give just one example, the Conference Board’s Leading Economic Index, which is designed to combine several “forward-looking” factors into one number, continues to flash yellow, as you can see in the chart, dropping to levels that have often been associated with recessions.

Data source: The Conference Board, NBER and The IVA

I didn’t expect we’d slip immediately into a recession with the turn of the calendar, so seeing GDP clock in with a gain in the first quarter doesn’t come as a surprise. Nonetheless, that’s one quarter down and a potential recession in the cards. Frankly, this is one forecast I’d be happy to get wrong!

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