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– June 9, 2015

Our index of leading indicators rebounded nicely in May, rising to 64 following three months at the neutral 50 level. Combined with a stronger 84 reading from our score of cyclical leaders (up from 79 in April), the results suggest a receding risk of recession. The improvement comes as the Bureau of Economic Analysis (BEA) said the U.S. economy shrank at a 0.7 percent annual rate in the first quarter. Amid few positive signs, our analysis has pointed to temporary factors for the winter weakness. We expect moderate expansion to resume.

A return to moderate growth would build on sound fundamentals for key components of demand: consumer spending, business investment, and to a lesser degree, residential housing. If these areas meet expectations, the economy should expand at a moderate pace, spurring growth in private nonfinancial-sector credit (Chart 1). This rise is normal in an expanding economy, providing opportunities for borrowers to manage balance sheets. It also gives credit investors an option for lower-risk returns and broadens business and profit growth opportunities for commercial lenders.

Next/Previous Section:
1. Overview
2. Economy
3. Inflation
4. Policy
5. Investing
6. Pulling It All Together/Appendix

 

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AIER Staff

Founded in 1933, The American Institute for Economic Research (AIER) educates people on the value of personal freedom, free enterprise, property rights, limited government, and sound money. AIER’s ongoing scientific research demonstrates the importance of these principles in advancing peace, prosperity, and human progress.

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