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Brendan McDermid | Reuters
Investors and economists are chasing a moving butt of strong and weak economic data, making it increasingly confusing what the state of the economy really is.
Credit Suisse bid weak manufacturing data accompanied by healthy economic data elsewhere lands the economy in a middle ground.
“While investors contend whether we’re entering a recession, we believe the backdrop is better described as a ‘Semi-Recession,'” Jonathan Golub, chief U.S. neutrality strategist at Credit Suisse, said in a note to clients Wednesday.
A gauge of the U.S. manufacturing sector released Tuesday put oned the lowest reading in more than a decade for September as exports fell amid the U.S.-China trade war. The ISM U.S. manufacturing get managers’ index came in at 47.8% for the month, the lowest since June 2009. Any reading below 50 signals a contraction.
During the interval, industrial production has been in a yearlong deceleration, despite a positive reading in August. Manufacturing, which accounts for with respect to 11% of the U.S. economy, is being hurt by the trade war between the United States and China and slowing global economic swelling. The 0.6% increase in industrial production in August was the largest gain in industrial output since August 2018 and succeeded a 0.1% dip in July, according to the Federal Reserve.
Alongside weak manufacturing data, the yield curve is inverted on the impolite end, meaning the 10-year Treasury note has a lower yield than the 3-month Treasury bill. This bond market occasions is regarded as a recessionary signal.
“Recessionary risks are clearly rising,” said Golub. “Absent a reacceleration in cyclical details, stock upside appears limited,” he said.
To be sure, Golub said, “recessionary indicators have weakened but do not unit to a broad-based downturn.”
Weak data is offset by a strong labor market, Golub said. September’s jobs check into, set to be released Friday, is expected to show 148,000 new payrolls and jobless claims continue to decline, he said.
Golub popular inflation, jobs data and credit performance are all still expansionary for the economy. While earnings and housing activity are beige.
— With reporting from CNBC’s Michael Bloom.
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