Downturn Fears Pushed to 2025 After ISM Data

  • Fears of an economic recession may need to be pushed back to 2025, according to JPMorgan.
  • U.S. factory activity increased in March for the first time since September 2022.
  • JPMorgan said the rebound in manufacturing activity bodes well for continued economic resilience.

The long-awaited recession that many economists and investors feared may have been delayed until 2025, according to a recent note from JPMorgan’s trading desk.

The note highlights the unexpected strength of ISM manufacturing activity in March, which jumped above 50 for the first time since September 2022. A figure above 50 represents an expansion in manufacturing activity, while a figure above below 50 represents contraction.

Strong manufacturing data ended a 16-month decline in U.S. industrial activity, as solid demand for goods led to a strong rebound in production during the month.

Ellen Wang of JPMorgan and Andrew Tyler of the Market Intelligence team said the reading “contributes to additional evidence on the global manufacturing recovery.”

The data comes as global PMIs also reflect a rise, suggesting the strength is not limited to U.S. factories.

According to Wang and Tyler, economic data should “provide further confidence that the U.S. economy is recovering in new areas” and that “recession fears for 2024 are likely to extend into 2025.”

If a potential recession is pushed back to 2025 due to strong manufacturing data, it would represent another year in which many economists were wrong in their recession forecasts, although some have backed away from their call for a recession after the resilience observed throughout 2023. in a context of higher interest rates.

Current fears of a recession revolve around the scenario in which inflation remains stubborn and difficult to contain, leading the Federal Reserve to keep interest rates high for longer.

But Tyler and Wang aren’t worried about that scenario, either for corporate profits or the stock market.

“This is not an issue for stocks where we continue to see size/quality type names dominate sector performance as these companies continue to post strong results in a high rate environment and have done so in 2023, when much of the world was significantly weaker than they are today,” the note said.

JPMorgan’s markets desk also argued that a strong labor supply should help contain wage inflation, which is a major component of overall inflation.

In addition to the strong ISM manufacturing data, the Fed’s GDPNow estimate of 2.8% economic growth in the first quarter, high job openings and historically low unemployment claims confirms the view of JPMorgan from a delayed recession.


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