The odds of a US recession are growing

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Although small, the risk of a recession in the US in the next 12 months is growing, according the latest monthly survey by the Wall Street Journal.

Based on responses received in June, 20.7% believe the US will fall into recession within the next year, taking the perceived risk back to highs seen earlier in the year.

The chart below, supplied by ANZ research, shows the recent increase in recession odds seen in the WSJ survey.

Although it has increased recently, ANZ’s own US recession index currently puts the odds of recession at 15%. It can be found below, and is clearly well below levels seen in prior years.

“As we have highlighted previously, the current slowdown in the US is largely concentrated in certain segments of the factory sector,” says Tom Kenny and Giulia Specchia, economists at ANZ.

“That said, the weakness in business investment is becoming broader based and is worth monitoring. On the flipside, the household sector is growing solidly (consumption is growing at around 4% saar in Q2 2016).

“As household consumption makes up about two-thirds of US GDP, it would require significant declines in activity elsewhere to drive the economy into recession.”

The US economy has currently expanded for 85 consecutive months, the fourth longest post-war expansion on record.

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