Author: Felix Jauvin, Blockworks; Compiled by: Deng Tong, Golden Finance

Since COVID shut down the global economy in 2020, it has become very difficult to judge which stage of the business cycle we are in.

A typical business cycle looks like this, and historically it's easy to get a rough idea of ​​which stage we're in by comparing it to interest rates and currencies:

In recent years, however, everything has turned a bit upside down, confusing many economists.

For example, in 2022 we see negative real GDP (initially 2, but later revised down to 1):

However, according to JOLTS , during the same period we experienced one of the hottest labor markets ever.

With such a strong labor market, it’s hard to believe there’s a recession:

Since 2022, we’ve seen the Fed go through A major interest rate hike cycle, overall, did not lead the economy into recession. Stocks are hitting new highs every day, the labor market has cooled but remains resilient, and GDP growth is strong.

However, over the same period, if you focus on the manufacturing and goods sectors and leave services aside, it almost looks like we just experienced a manufacturing recession.

The ISM Manufacturing PMI has been in contraction territory for a few years now:

During this period we have seen severe deflation, leading to a decline in the goods sector of the economy Outright Deflation:

Fast forward to today and we have seen the Fed cut interest rates in response to concerns about the labor market and continue to try to soft-land the economy into a recession-free New business cycle.

The leading indicators we are seeing now suggest that the manufacturing industry may be emerging from the downturn and heading towards a new upward trend.

We are starting to see commodities explode after two years of consolidation, suggesting economic growth is picking up:

ISM new orders appear to be exploding, The same goes for the Philadelphia Fed Manufacturing Index:

This has been largely driven by optimism in the business sector since the election, according to survey data:

So where does this chart journey lead us?

I think it’s safe to say that we are not in the late stages of the cycle. We appear to be in the early stages of a new business cycle, having avoided a recession thanks to the massive fiscal stimulus and deficits of the past few years.