Recession signal flashes on Oxford Economics' US indicator, but spending shows no sign of cracking

A recession signal against a backdrop of strong data makes it a useful counterpoint for bond markets. It gives Treasury bulls an argument just as 10-year yields sit above 5.2% and Fed hike odds are rising. Markets are unlikely to react much for now, because Oxford itself plays down the signal and current data points the other way. The warning matters more as a sign of what could go wrong if energy prices stay high and borrowing costs keep rising. Any softening in spending data would give it far more weight quickly. --- Oxford Economics' US indicator says recession, but consumers and AI spending say otherwise. It's a reminder that energy costs and a shrinking labour pool are building pressure beneath some very strong headline data. Summary: Oxford Economics' US business-cycle indicator has fallen into the recession zone Higher energy prices squeezing real incomes and slower immigration weighing on job growth are the main drivers The firm warns the signal may not be definitive, citing strong productivity and a wealth effect supporting spending Households have not shown the shift to cheaper spending that typically comes with recessions AI infrastructure spending, high profit margins and recent tax cuts are underpinning business investment Tariffs and policy uncertainty remain the key downside risks Two forces are behind the deterioration. Higher energy prices have eaten into household real incomes, and slower immigration is dragging down the underlying trend in employment growth. Yet Oxford Economics cautions against reading the indicator as a definitive recession call. Productivity growth has remained strong, and rising household wealth has kept consumer spending going. Crucially, households have not shown the trading down in spending that typically appears ahead of or during a downturn, when consumers switch to cheaper goods and cut back on discretionary purchases. Business investment is also holding up. The firm points to spending on AI infrastructure, elevated corp