The Recovery Is Still On Track
The diffusion index of our US growth Nowcaster, which measures the proportion of improving underlying data, has receded from its peak of 88% at the end of July to 59% at the end of August. However, it is important to put these numbers in context as economies cannot sustain such a strong pace. For example, during previous expansions in the US (1991 and 2009), the economy rebounded strongly from its nadir (the US diffusion index hitting 75% and 80%, respectively, in the first month of recovery following the 1990 and 2008 recessions). The economy then continued to expand at a more modest pace (the diffusion index averaged 53% and 63% over the following twelve months, respectively), as the economy shifted to more steady and sustainable growth levels. Thus, while we acknowledge that the recovery has slowed, we do not yet think it is at risk of derailing.
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