The US economic picture was still rather buoyant, all the while trade clouds continued to loom. In fact, although recent tariff announcements by President Trump have put this resilience in jeopardy, industrial production was unchanged overall in April. Other gauges point toward an economy handling challenges with apparent ease, and not in the midst of a recession.
Initial jobless claims reported for last week remain very low at 229,000, consistent with an incredibly tight and stable labor market. Importantly, there’s been no indication of a worrisome spike in jobless claims – the kind that would foreshadow more widespread economic crisis. Market analysts point out that this continued stability is very important, as it indicates consumer confidence and continuing resilience in the industry.
On the retail performance front, retail sales rose 0.1% in April, beating forecasts of a 0.4% decline. And retail sales increasing, consumers can’t wait to spend their dollars. That excitement goes a long way toward calming concerns over issues like trade and tariffs. The retail sector isn’t the largest part of GDP, but it is the heart and soul of our economy. These numbers provide some comfort to people in the markets.
The industrial sector only accounts for about 20 percent of US GDP. This is perhaps why the flat production numbers have produced such a subdued response. As market forecasters, we know the most important indicator is industrial output. It is not the only thing that drives the economy’s overall direction.
Inflation expectations have surged. The one-year ahead inflation expectation hit an all-time high in April, as did the five-year ahead expectation. It’s President Trump’s tariff announcements have been responsible for these increases. This has sparked some alarm over increasing inflationary impact on consumers and industries alike. Market participants are paying particular attention to data on consumer inflation expectations out of the University of Michigan. That’s deep, rich data to understand spending habits moving forward.
Worries about a sharp and long-lasting recession from the trade war have been widespread. On this cause, powerful new developments indicate that everything is changing. As you are likely aware, over the weekend the US and China came to an agreement on trade. This accord raises the intention to reduce tariffs to pre-Liberation Day levels for a minimum of 90 days. This deal has tested markets and consumer fears of recession, putting to ease some of the anxieties in our markets and pulling down the fears of a recession.
Recent forecasts now put the odds of a US recession by 2025 at around 50 percent. This is indicative of a very tentative view, it’s nothing but optimistic in battling the obstacles. Analysts say that overall, despite the risks, the economic landscape is likely to stay calm in the near future.