Why not consider the current U.S. economy as a "recession"?

Just released US manufacturing and services PMI data once again confirm a common misconception amplified by emotions: The economy is cooling down, but it is far from collapsing.

Yes, both PMI figures are below previous values and market expectations, but a key fact is often overlooked — they still remain firmly above the 50 expansion/contraction threshold.

The core signal conveyed by PMI: slowdown, not a cliff

The essence of PMI is not to predict whether the economy is “good or bad,” but to judge whether economic activity is expanding or contracting. 50 is the dividing line; above 50 indicates expansion, below 50 indicates contraction.

Current data more closely resemble the natural result of the economy entering the latter half of a high-interest-rate environment:

• Corporate expansion intentions decline,
• Marginal demand weakens,
• Investment becomes more cautious.

But this is not the same as demand collapsing off a cliff or a credit chain breaking.

True recession, PMI would not be so “mild”

Looking back at history, during a genuine economic recession, PMI usually drops sharply below 50 and remains in contraction for several months. At the same time, there is a synchronized deterioration in new orders, employment, and inventories, with companies shifting from “cautious” to “passive defense.”

Currently, the situation is:

• Manufacturing and services are still in expansion territory,
• But the pace of expansion has clearly slowed,
• Companies are more focused on cost control, destocking, and order quality.

This is closer to soft landing or weak growth, rather than the prelude to a typical recession.

Services still expanding, this is very significant

More importantly, the services PMI remains above 50. For the US, this is crucial.

The core of the US economy is not manufacturing but consumption and services. As long as the services sector does not experience systemic contraction, employment and household income will not decline significantly, making a true economic recession unlikely.

In other words, as long as the services sector holds steady, the economy is unlikely to “collapse.”

For the Federal Reserve, this is a “wait-and-see” environment

This economic state is friendly to inflation easing and gives the Fed more room to observe and wait. But it is not yet enough to justify aggressive easing policies to hedge against a recession.

It now resembles a balancing phase after being suppressed by high interest rates:

• Growth is slowing,
• Risks are accumulating,
• But the system has not yet stalled.

Conclusion

Markets are always quick to equate “cooling” with “recession,” but the data itself does not support this linear extrapolation.

At least from the PMI perspective, the US economy is slowing down but has not yet entered a true recession zone. Emotions may run ahead, but it’s best to wait for the data to truly confirm.