US Business Growth Bullish Despite Recession Signals: Study

Despite concerns over a looming economic recession and some headwinds, the business climate in America remains strong, according to a new study by Citizens Bank.

The report noted that companies in the U.S. are on a high-growth path, as evidenced in the Citizens Business Conditions Index.

The study tracks the healthy growth of U.S companies as borne by a national index based on corporate and public data about business growth and employment across the country.

The current nationwide index is a healthy 61.2, slightly down from 61.5 in the first quarter of the year.

This means despite concerns that the momentum of economic growth is losing steam, the U.S. companies continue to remain in a good growth trajectory.

Strong fundamentals including revenue, manufacturing volumes and wages are backing the companies.

Recession signals from the bond market

The recent rate cut by the Fed was also attributed by many as a recipe to cushion the risk of recession. On Aug. 14 the recession indicator flashed a stark red signal stroking bigger fears of a slowdown.

The bond yield curve inverted a couple of times hinting an economic crisis in the offing.

The 2-year Treasury note yields fell below 10-year bond yields. That used to be a sure signal about a recession in the past 50 years. Stock market news traced the same alarm signals to the stock market plunge in the aftermath.

But yield curve inversion is not always taken as the sole indicator of an impending recession. Other factors are also considered; consumer confidence and the strength of the labor market that now stays strong.

The longest period of economic expansion

Helping the U.S companies have been the U.S economic expansion that entered a record eleventh year.

“There is uncertainty about a range of factors including trade, Fed rates, Brexit and the election, just to name a few,” noted Tony Bedikian, head of global markets for Citizens Commercial Banking.

But businesses should seize every opportunity and make informed decisions to hedge their risks, he noted.

In July, the U.S. economy added 164,000 jobs. It was not an impressive figure. But it revealed that economic expansion is continuing at a healthy pace.

The unemployment rate is at 3.7 percent, which is a near 50-year-low, while average hourly earnings increased 3.2 percent.

Why Goldman Sachs saying recession not ruled out?

However, recession can still engulf the U.S economy. That is what a report by Morgan Stanley warned.

Morgan Stanely thinks the U.S. is on a high probability phase of a recession. What factor will spark the next recession remains a mystery.

In the U.S, a recession happens when there is a serious monetary tightening or financial crises coming from asset bubbles or external shocks.

The U.S economy in 2008/09 came to the edge and the global financial crisis broke out from the collapse of the American housing bubble.

But real trigger was the excessive concentration of ownership of mortgage-backed securities.

President Trump’s using of trade and currency as weapons have added more turbulence in the global economy and the uncertainty waves can push a top economy into recession.

But Trump’s take is that there is no scope for a recession in the U.S economy. “I don’t see a recession,” the President said making some important Trump news on the economy.

“We’re doing tremendously well. Our consumers are tremendously rich. They’re loaded up with the money. We’re not going to have a recession – the world is in a recession right now,” Trump added.