From The Editor

A Tale of Two Economies

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The U.S. economy is entering rare territory, in more ways than one.

Barring a cataclysmic event over the next five days, the U.S. economy will mark its 10th year of expansion on July 1, marking the longest run of growth since the data was tracked. The average post-recession recovery lasts less than half that, typically petering out after four years.

But that’s not the only way the current market differs from the past, CIBC Bank USA Chief Investment Officer William Norris said at last week’s meeting of the Association of Steel Distributors and Association of Women in the Metals Industry in Chicago.

Right now, the consumer side of the market is humming along, with no signs of a slowdown. Unemployment is at record lows, wages are finally on the rise and consumer confidence is at high levels. Such strong fundamentals on the consumer side bode well for the coming months.

On the other hand, the business side is struggling, and has been since the end of 2018. Though still positive, the PMI has shown slowing growth for several months, and could tick into the negative by next week’s June report. Other indices, such as the Manufacturing Index and the Morgan Stanley Business Conditions Index, have, in Norris’s words, “fallen off the cliff.” Whatever boost the consumer is giving to the economy is not being felt by the manufacturing sector.

While the U.S. consumer has been the chief driver of the economy for a long time, such a bifurcation of the two ends of the economy is still rare. “The balance has shifted more to consumer services, but we’ve never seen this before. We don’t know what to expect,” Norris said.

Moreover, he said, there’s no guarantee it has to correct itself. “Manufacturing is still very important, but some could argue we could have this for quite some time.”

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