What recession? U.S. trade stages a ‘remarkable turnaround’

Healthy consumer spending is pushing the U.S. economy to heights unseen in the rest of the world, giving analysts belief that a recession may be less likely or at least softer than once predicted.

According to Tradeshift’s Index of Global Trade Health Q2 2023, U.S. transaction volume came in higher than analysts had predicted for the second quarter of 2023 – a “remarkable turnaround” from the last two years of below average growth, analysts explained.

Americans are buying more, which is clearly benefiting vendors and causing economists at Goldman Sachs to cool their predictions for a recession.

“The resilience of the US economy has caught many forecasters by surprise,” the analysts admitted.

The U.S. economy is healing

At the root of Q2’s positive news is improving consumer confidence.

The Conference Board’s Consumer Confidence Index, which, broadly speaking, tracks how Americans feel about spending their money, increased 7% from May to June, to its highest level since Jan. 2022.

Positivity about the state of the economy reflected in trade activity, with transaction volumes – how much people are buying and selling – coming in 3 points above Tradeshift’s expected range.

“Trade activity appeared to shrug off recent challenges,” the analysts wrote, “including the inventory glut, which weighed down ordering activity during the second half of 2022.”

The same cannot be said of the rest of the world, where trade activity is largely still down below historical averages. Only China, recovering from its strict COVID lockdowns, is experiencing steady but unexceptional trade growth.

Tradeshift’s analysts summed up the situation in few words:

“Trade activity in the US,” they wrote, “is leaving the rest of the world in its wake.”

What’s next for the U.S. economy

The uplifting views are clearly starting to spread.

In a report published June 6, Goldman Sachs estimated the likelihood of a recession coming in the next 12 months at 25%. That may sound bad, but its prior prediction was significantly higher – 35%.

Its experts cited Congress’ agreement on a raise for the debt ceiling, and only limited economy-wide impacts resulting from the struggling banking sector.

“This leaves us with a 2023 growth forecast of 1.8% (annual average),” the economists wrote, “well above both the private-sector consensus and the Fed’s view.”

Despite all the positive news, Tradeshift also offered some dose of reality.

“The outlook remains mixed,” the authors of the report explained, citing that “consumer spending is beginning to slow [. . .] manufacturing orders are also showing signs of weakness,” and “higher input costs and muted demand are weighing on exports.”

And so, the mood is one of cautious optimism. “The US’s ability to achieve a soft landing,” they concluded, “will likely depend on the sustained strength of its domestic market.”