This Thursday at the Paris Stock Exchange, on the day of the publication of US GDP for the second quarter, Bedroom 40 rose 1.3% to close at 6,339.21 points, despite weak performances from heavyweights such as Airbus and TotalEnergies, which are among the many companies that released their second-quarter reports between last night and this morning, ahead of the open.
The Paris index, after a shaky morning to say the least, found – against all apparent logic – a rebound after the 2.30pm announcement of an “unexpected” contraction in US GDP for the months since April. to June (-0.9% quarter-on-quarter in annual data), where the consensus was expecting a rise of 0.4%. In fact, the surprise is not so great. While Bloomberg consensus economists were still predicting growth, the Atlanta Fed’s GDPNow model, one of the regional branches of the US central bank, pointed to a contraction in GDP.
Like others, economist Bruno Cavalier of the private bank Oddo BHF saw this contraction. He reminded about this at the beginning of the week “Real GDP has already fallen in the first quarter. According to a commonly accepted but dubious definition, the United States would have been in recession in the first half of the year… An interesting recession when employment, income and spending continued to rise. The weakening of the US economy is undeniable, but until June it was not strong enough to cause a turnaround in the labor market, nor, unfortunately, to reduce inflation. »
A contraction without a recession is what the stock market likes, especially after the Fed’s monetary policy decision and the statements made by its president. After announcing a further 75 basis point increase in US benchmark interest rates, the US central bank, through Jerome Powell, suggested last night that most of the monetary tightening was done. “Jay” Powell said that ” at some point it will be appropriate to slow down “. Bank rates are now in the range of 2.25-2.5%, and in his statements the main central banker of the United States made it clear that the most recent forecasts of the Fed are from June, which indicate that rates should be between 3% and 3 .5% by the end of the year – remained the best guide for US monetary policy, even if the closely watched inflation Fed can’t help but say it will decide with confidence at its next meeting in September, when two new reports will be released on the change in the price index: July and August.
Meanwhile, among the comments that swayed investors was one echoed in many reactions this morning that the Fed was beginning to see signs of the US economy cooling, and that’s exactly what it was trying to do by raising rates. , to calm inflation, avoiding as much as possible the economy from plunging into recession, but knowing that the central bank’s mandate is price stability, not economic growth. The stock market is starting to think that if the Fed doesn’t go too far in raising rates, a recession—a real, job-killing one—will finally be averted.
Unheard of in the last 70 years
Until today, every time since 1948 that US GDP contracted for two consecutive quarters, it effectively signaled a recession, as widely understood. But this time, although wealth created in the first economy fell 0.9% in the second quarter in annual data after -1.6% in the first three months of the year, the National Bureau of Economic Research (NBER) will not officially announce the entry into the recession
“The annual decline is disappointing, but it does not mean the economy is in recession. The decline is due in part to a huge slowdown in inventories, while most other comparable indicators, including employment, show steady growthexplains economist Andrew Hunter from Capital Economics. However, the details show that higher rates and high inflation are weighing on underlying demand, and we expect only a moderate recovery in GDP in the second half of the year. »
“The NBER would be a laughing stock to say we’re in a recession when we’re adding 400,000 jobs a month”mocked Dean Baker, co-founder of the Center for Economic and Policy Research, on the US financial channel CNBC earlier this week. “I can’t even imagine that they would think for a second that we’re in a recession. »
During the first six months of the year, the United States added an average of 457,000 non-farm payroll jobs per month, a trend that can hardly be attributed to an economic downturn. In addition, there are 11.3 million unfilled jobs for just 5.9 million freelancers.