While a recession could still happen, it may be a long way away.
For months, several reports indicated the U.S. economy was quickly approaching what many feared to be a recession. After all, America’s looming trade war with China ignited geopolitical headwinds that posed a significant threat to the nation’s economy. In fact, a poll of economists conducted by Reuters revealed that the median probability of a recession within the next year rose to 25% in January. Additionally, a survey produced by the National Association for Business Economics, which detailed the economic predictions of 281 members, determined that 75% of its economists expected the economy to slip into a recession by the end of 2021. However, the first reading of our Gross Domestic Product report produced by the Bureau of Economic Analysis signaled the economy was strengthening. In fact, Q1's readings even surpassed the 2.4% growth estimate produced by a poll of economists conducted by CNBC and Moody's analytics.
"Although this advance estimate is subject to revision, if it holds up, this faster growth should continue to provide strong support for the job and housing markets,” Mortgage Bankers Association Chief Economist Mike Fratantoni said. Although Fratantoni said Q1’s results were strong, Navy Federal Credit Union Corporate Economist Robert Frick claims they are actually skewed. “GDP stomped estimates, coming in at 3.2%, but the first quarter report was market by unusual data that inflated it temporarily--mainly short-term boosts from higher inventories and from trade (which added one percentage point alone),” Frick said. “If you factor out those one-offs, you get GDP rising at just 1.3%, as measured by final sales to private domestic purchasers.” That being said, Frick notes that the economy can still find its way out of the woods as the likeliness of a recession may be a long way off. The data may be showing that the economy is growing, but not fast enough to spark a level of inflation that would force the Fed to hike rates.
Source: HousingWire