It wasn’t the relatively small size of the rebound in April’s U.S. retail sales report that captured the market’s attention on Tuesday, as much as the rebound itself.After data showed sales at U.S. retailers rose by just 0.4% last month, below the 0.8% rise expected by economists, traders ran with it, focusing on the fact that sales didn’t decline as they had in four of the five months prior to April. Other data released on Tuesday showed industrial production rose by a better-than-expected 0.
In addition, there’s still plenty of demand for workers, with the labor market continuing to hold up, Gillum said via phone. That all adds up to a 25%-30% chance of a scenario in which the economy simply “muddles through”, with some sectors, like manufacturing, in danger of a recession and others, such as services, doing fine. However, LPL Financial sees a 60%-65% chance of a recession in the second half of this year, he said.
What’s less-talked about is whether another powerful byproduct of the pandemic is an unexpectedly stronger U.S. economy — one that’s less sensitive to higher interest rates and less prone to contracting. “You can get a lot of recessionary indicators flashing, but they are based on a history of how the economy typically behaves. And it’s possible to get, say, a manufacturing recession, but not a general recession,” Tang said via phone.