Slowing GDP Just Among Other Red Flags In Possible U.S. Recession

Donald Trump
U.S. President Donald Trump speaks to reporters before boarding Air Force One to return to Washington from Morristown Municipal Airport in Morristown, New Jersey U.S. August 18, 2019. (Photo: REUTERS/Jonathan Ernst)

U.S. President Donald Trump said the country is far from recession. However, analysts found multiple red flags in the American economy that could point to the shaky ground and one of them is slowing gross domestic product (GDP).

According to CNBC, analysts noted that the United States has slowed down in its growth rate over the past months.

For the second quarter of 2019, the country posted two percent growth - the slowest yet since Q4 2018 and a huge chunk of the GDP rate that was recorded in the first quarter of this year.

Another issue that economists have been keeping an eye on is the benchmark 10-year Treasury note that has been dropping for the past three weeks.

Analysts usually rely on the bond market's yield curve signal to determine an upcoming recession.

Companies are also showing a downtrend in earnings. In the U.S., the S&P 500 is a trusty indicator of how earnings are doing so far. Analysts recently set estimates of S&P 500 earnings at 2.3 percent. It is worth noting that by year-end 2018, estimates for the said index stood at 7.6 percent.

Copper and gold are both not doing too well in global markets. Copper, for instance, dropped over 13 percent for the first half of 2019. Gold prices kept going up for the past three months, but the uptrend is actually an indication that investors and buyers are running to gold as a shelter when economic uncertainties arise, analysts said.

Finally, U.S. factory activity is causing concern in American markets. For the first time in a decade, the U.S. manufacturing PMI slumped to 49.9 last month. The figures have never come down before the neutral 50.0 benchmarks for the past 10 years.

It did not help that the U.S. Federal Reserve expressed fears about slowing key drivers in the U.S. economy. One of the mentioned sectors is manufacturing. In July, Fed members said the China-U.S. trade war is impacting business confidence in the country.

Oil prices are also becoming one of the determining factors on how the American economy is performing so far. Trump has been urged to be mindful of declining oil prices. Lower oil prices could have an impact on stock prices in the country, thus pulling down the economy, analysts noted.

Economic experts said late in August that the trade war is taking a toll on the U.S. economy just as much as it is affecting China. Due to the slower expansion in Q2, some analysts believe the White House may not reach its initial growth estimates for 2019.

Despite clouds gathering above the American economy, consumer spending is keeping everything balanced. Spending recorded growth of 4.7 percent - the fastest yet in five years.

© 2019 Business Times All rights reserved. Do not reproduce without permission.
Sign Up for Newsletters and Alerts