The housing market suggests that the US economy dodged the recession bullet and is poised for more growth ahead
"Single-family starts surged 19% in May. Meanwhile, economists expected a small fall in starts, once again highlighting the disconnect between what's happening in the economy and expectations," he said, adding that building permits jumped 5% in May and are up 13% since November.
"Builders wouldn't be looking to get new construction authorized if they were pessimistic about the housing market."to Varghese that the economy is not in a recession, nor is it close to entering one in the next couple of months. Additionally, the data suggests that the US economy is not in a late cycle, nor is it on the precipice of entering a recession within the next six months.
"If anything, the current dynamics are akin to what we see early in an economic expansion, which goes against forecasts that predict a recession soon. What's clear is that 7% mortgage rates are not deterring new home buyers... At the end of the day, if someone wants a house, they're going to buy a house," he said.
Other factors that give him confidence that the US economy dodged a recession and is most likely still in expansion mode includes continued strength in consumption, growing real incomes as inflation falls, the likely end of interest rate hikes from the Fed, easing supply chain disruptions, and a pickup in manufacturing activity.
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