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The strength of the US economy is a major talking point at the moment. After a strong end to 2024, there are some signs that there is a slowdown in the economy. Consumer sentiment has weakened significantly, and retail sales growth, although still positive, has been decelerating. There is a growing fear that, with slowing momentum, policy confusion, and the implementation of tariffs, the US economy could tip into recession.
One can never rule anything out, but there are some encouraging signs and signals that recessionary conditions are some way off. One of these is the Institute for Supply Management (ISM) Manufacturing Index. In the chart below, you can see that it has been strengthening since September of last year. In the early months of this year, it broke through the 50 level for the first time since the middle of 2022. This indicates that US manufacturers are seeing their business expand for the first time in three years.
If we look back at the pandemic recession in 2020, you can see that this index gets down into the low forties in recessionary conditions. Currently, it is above 50, so it’s a long way from a recession reading.
