Photo: Dan Frommer
According to the National Bureau of Economic Analysis, the U.S. economic recovery began in June 2009, which means it has been growing for a solid 36 months.Yesterday, we learned that the June ISM report collapesd to 49.7 from 53.5 in May. Economists were looking for a reading of 52.0. A reading below 50 signals contraction.
So, are we heading for a recession?
Deutsche Bank’s Jim Reid notes that the duration of the average recovery usually ends right around now:
H2 began yesterday with the first sub 50 US ISM print since the recovery started back in the middle of 2009. Indeed its hard for us to not link in yesterday’s disappointing number with our shorter business cycle theory. We won’t bore readers with the rationale for our theory yet again but its interesting that after 35 successive months of 50+ ISM readings we have now dipped below the magic number. Over the last 158 years of history (33 cycles) the average expansion has been 39 months long. So this cycle is already reasonably mature and we all have to decide whether this one deserves to extend much further given the current easy policy conditions or whether its running out of steam given the tough macro and structural backdrop.
A recession would certainly be unwelcome news given the elevated level of unemployment.