US retail sales ticked higher in August, rising 0.2%–below several consensus forecasts but still a decent if unimpressive gain. Industrial output in the US in August, on the other hand, was clearly disappointing, suffering a 0.4% slide vs. the previous month—the weakest performance in three months. On a year-over-year basis, industrial activity also weakened, with growth dipping close to its lowest pace since the US recession ended in 2009. Does this add up to a clear signal that a new recession for the US is now fate? Some are tempted to make that call, but I’m not there yet, as I’ll explain.
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Last week’s forecast of “rapidly rising risk” of a global recession from Citigroup’s chief global economist, William Buiter, is attracting attention, which isn’t surprising at a time of stumbling financial and commodity markets. “The most likely scenario (40% probability), in our view, for the next few years is that global real GDP growth at market exchange rates will decline steadily from here on and reach or fall below 2% around the middle of 2016,” he wrote. “Growth is likely to bottom out in 2017 and start recovering again from late 2017 or early 2018.”
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