Dive Brief:

• Economic data over the past six months no longer herald a downturn, with credit improving, stock prices rising, and both new orders and average weekly hours in manufacturing on the upswing, the Conference Board said Monday.
• “The six-month annual growth rate no longer signals recession ahead,” Conference Board Senior Manager Justyna Zabinska-La Monica said, pointing to a 2.1% decline in the board’s Leading Economic Index during the six months through July compared with a 3.1% decrease during the prior six months. 
• Still, “data continue to suggest headwinds in economic growth going forward,” she said in a statement, predicting that consumers and businesses during the next few quarters will likely further cut spending and investment. The economy will probably grow at a 0.6 annual pace this quarter and 1% for the year, she said.

Dive Insight:

Early this month a worse-than-expected report on July payrolls sparked recession fears and kneecapped equity prices. The jobless rate rose last month to 4.3% from 4.1% in June, and payrolls expanded only 114,000, below expectations and the lowest monthly increase this year.

Since then, several data points paint a sunnier outlook for the economy, discouraging forecasts of a downturn and spurring a rebound in stock prices.

Although unchanged overall compared with July, confidence among consumers rose in some respects this month, according to a University of Michigan report on its survey of consumer sentiment. Consumer spending fuels about 70% of economic growth.

“Expectations strengthened for both personal finances and the five-year economic outlook, which reached its highest reading in four months,” Joanne Hsu, director of the university’s consumer survey, said in a statement Friday.

The day before, the Commerce Department said that retail sales last month rose a higher-than-expected 1% compared with a 0.2% decrease in June.

Also, the two most recent weekly reports on jobless claims have been lower than expected and, on Aug. 13, the National Federation of Independent Business said its index of small business optimism rose in July to the highest level since early 2022.

“Small business optimism is at the same level as when the Fed [Federal Reserve] started raising interest rates in March 2022,” Torsten Sløk, chief economist at Apollo Global Management, said Monday in a note to clients.

“This is not a recession,” Sløk said. “If anything, this suggests the economy is reaccelerating.”

The Atlanta Fed predicted Friday the economy will likely grow this quarter at a 2% annual rate.

Yet all the data is not bright.

The New York Fed found that 4.4% of respondents to a consumer survey expect within the next four months to be unemployed, the highest proportion since the start of the survey a decade ago.

At the same time — in a sign of churning in the labor market — a higher number of consumers expect to receive a job offer in the next 12 months compared with a year ago, the New York Fed said Monday.

Wall Street investors and economists believe data suggest that next month the Fed will reduce borrowing costs for the first time in the current monetary policy cycle.

Traders in interest rate futures see 78% odds that policymakers next month will reduce the federal funds rate by a quarter percentage point, according to the CME FedWatch Tool.

The central bank has held the benchmark interest rate at a range between 5.25% and 5.5% since July 2023.