Jurrien Timmer of Fidelity: 'This is not what a recession looks like'

We see more and more that we are heading for a recession. The US economy confirmed yesterday with negative GDP growth of 0.9% that it is, at least technically, in recession. Many economists consider two consecutive quarters of negative GDP growth to be a recession and yesterday's reading was number two.

Fidelity's Jurrien Timmer, however, says he sees few signs of an actual recession at the moment. "There are signs of economic growth everywhere," said Timmer.

https://twitter.com/TimmerFidelity/status/1552660996518547457

Economic reality matters

While it may seem that a recession is in the air, Timmer says that is not always a reflection of economic reality. Of course, it is not true that two quarters of negative GDP growth necessarily means that we are heading for a miserable period. After all, a "recession" is just a concept to which economists attach a few conditions.

In any case, Timmer believes it is better to look at the full picture. What he sees there is the following: low unemployment, consumers who spend a lot of money and profits that continue to grow. All signs of positive economic development.

According to Timmer, the quarterly figures of large companies are a much better indicator of economic health than the latest US GDP reading. "If something breaks in the economy, we're going to see that reflected in the quarterly figures of the big companies that are now slowly coming out," Timmer said.

This would then manifest itself in comments such as "we may have to cut our workforce" or "we are not going to hire as many new people as before."

Quarterly figures do not point to recession

So far, Timmer notes that 70 per cent of companies have exceeded expectations in the past quarter. On average, companies' figures are about 4 percent better than expected, which is pretty good. On that basis, a recession still seems far away.

"It is true that the growth of profits is slowing down, but they are still growing at about 10 per cent a year. Which means that at least they are not falling off a cliff," said Timmer, indicating that things may be slightly down, but certainly not bad enough to speak of a recession.

Even the fact that we have now had two consecutive quarters of negative GDP growth does not mean, according to Timmer, that we are necessarily in a recession. "In most cases of two consecutive quarters of negative GDP growth we are in a recession, but not in all cases," said Timmer.

In any case, a technical recession like this is very different from an actual recession in which individuals lose their jobs and stop spending money, according to Timmer. The job market has hardly ever been tighter than it is today.
https://www.indexuniverse.eu/jurrien-timmer-of-fidelity-this-is-not-what-a-recession-looks-like/