- The US economy is trucking along just fine as consumers keep spending their hard earned money.
- Carson Group's Sonu Varghese says the US economy's impressive resilience means there's no recession in sight.
- These are the three signs that suggest the economy's strength means it doesn't have to worry about sticking the landing.
The US economy has continued to show remarkable strength over the past year despite a barrage of warnings from CEOs and economists that a recession is on the horizon.
Even the most recent batch of jobless claims data shows just how resilient the jobs market, and therefore economy, continues to be, with 228,000 in claims falling from the week prior and well below economist forecasts of 242,000.
According to a Thursday note from Carson Group's global macro strategist Sonu Varghese, the resilient economy means there is no recession in sight and a so-called "soft landing" may not even be necessary.
"Not only do we see no sign of recession, but it also doesn't even look like the economy is looking for a 'landing' at this point," Varghese said.
Looking at the last three months of economic data, Varghese highlighted three data points that suggest the economy is likely to remain stronger than many expect and ultimately avoid a recession.
1. "Consumption was strong."
Retail sales rose at an annualized pace of 4.7% in the second-quarter, and retail sales excluding vehicle and gas station sales rose at a 6.3% annual pace.
"Even after adjusting for inflation, 'real' retail sales rose at a 1.9% annual pace in the second-quarter, and are currently running 6% above the pre-crisis trend!" Varghese said.
2. "The supply side is coming back."
Vehicle production jumped 7.6% in the second-quarter, while production in the aerospace industry was up 4.7%, according to Varghese. Meanwhile, production in high-tech industries rose 3.9% last quarter and is nearly 17% above pre-pandemic levels.
"Production of business equipment outside of vehicles and high-tech also looks to have bottomed, which is a positive sign for Capex," Varghese said.
3. "Construction is booming."
Single-family housing permits jumped 11% in the second-quarter, while an index that measures homebuilder sentiment continues to move higher, Varghesi observed. That suggests home builders are getting more positive about future demand, even as mortgage rates top 7%.
"Meanwhile, total housing units under construction are near an all-time record. Combine that with a boom in manufacturing construction, and it's not a surprise why construction payrolls have increased by 88,000 this year and are about 339,000 above pre-pandemic levels," Varghese said.
Meanwhile, the Atlanta Fed's GDP forecast suggests quarterly real GDP growth of 2.4% in the second-quarter. Taken altogether, the data suggests to Varghese that the US economic growth reaccelerated over the past year.
"What is amazing is that the economy accelerated after a poor first half of 2022 even as the Federal Reserve hikes rates aggressively, taking the federal funds rate from 0.25% to 5.25%," Varghese said, adding that the unemployment rate remains steady at 3.6% and headline inflation fell from 9% to 3%.
"It really doesn't get better than that. Perhaps more importantly, there is no reason to believe a major slowdown is in the cards at this point," Varghese concluded.