The uncertainty surrounding the United States economy is seemingly accelerating as various indicators suggest a recession might be imminent.
For instance, data-driven research investment platform Game of Trades highlighted in a post on July 27 that the latest data from the ISM New Orders Index has revealed a significant slowdown in economic activity.
This crucial economic indicator has plunged to its lowest level in over a year, casting a shadow over what appeared to be a burgeoning economic recovery.
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The ISM New Orders Index, which tracks the volume of new orders received by manufacturers, is often seen as a leading indicator of economic health. Its recent decline suggests that the economic recovery may be stalling, with potential downside momentum mirroring patterns seen in past economic downturns, such as in 2008.
“ISM New Orders Index has plunged down to the lowest level in over a year. What looked like the beginning of an economic recovery in 2023 seems like it’s making a 180-degree turn with potentially significant downside momentum, something that’s typically only seen during actual economic downturns,” the platform noted.
Adding to the concern is the sentiment among the American public. Game of Trades stated that recent surveys indicate that 50% of Americans believe the US is already in a recession. News outlets often dismiss this belief as misinformed, particularly given the buoyant stock market performance.
Disconnect between stock market and economy
Notably, the S&P 500 index has consistently reached new all-time highs over the past two years, creating a perception of economic strength.
However, the research platform noted that the ISM New Orders Index plunge may lend credence to the public’s fears. The index’s sharp decline suggests underlying economic weaknesses masked by the soaring stock market. If this trend continues, it could validate the concerns of many Americans that the economy is on the brink of a recession.
The divergence between the stock market’s performance and the ISM New Orders Index raises questions about the actual state of the economy. While the stock market often reflects investor sentiment and expectations of future growth, the ISM New Orders Index provides a more immediate snapshot of economic activity. The current data indicates a troubling slowdown that could herald broader economic difficulties ahead.
Indeed, a previous Finbold report indicated that several indicators suggest an incoming recession. For instance, the fears are heightened based on trends observed in elements such as rising initial jobless claims, declining job availability, an inverted yield curve, and a disconnect between the economy and financial markets.
Overall, some analysts maintain that the recession could hit in the second half of 2024.
