Recession or boom? Morgan Stanley sees economy stuck in neutral

Investing.com -- Real-time U.S. economic estimates are split on whether a recession or boom is on the horizon,  but Morgan Stanley (NYSE:MS) believes the economy is likely stuck in neutral.

"We strongly doubt the economy is contracting. We also strongly doubt that it is accelerating. We think our not-too-hot and not-too-cold GDP tracker is closer to the truth," Morgan Stanley economists said in a report Friday.

The bank's GDP tracker points to sluggish growth of 1.4% for the first quarter, falling between the Atlanta Fed's GDPNow estimate of -2.4% and the New York Fed's Nowcast of 2.7%.

The are various fa wide dispersion in GDP estimates, the economists suggest, pointing to methodological differences, an unprecedented surge in gold imports, and front-loading of non-gold imports that has yet to show up clearly in inventories or spending data.

Gold imports have surged to 26 times their normal run rate in January, but these are excluded from official GDP calculations, the economists said.  Adjusting for this anomaly brings their net exports estimate more in line with other trackers.

But Gold imports aren't the only factor influencing GDP growth estimates. The economists said they observed a significant 6.1% increase in non-gold imports in January, potentially due to "businesses front-running expected tariff increases."

They cautioned, however, that data to date, don't provide "convincing evidence of where these imports have gone."

The divergence in the GDP trackers are likely to narrow as more data becomes available.

For the moment, however, the economists conclude that "growth has slowed; it is not contracting, nor has it accelerated."