Author Topic: RECESSION  (Read 1263 times)

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RECESSION
« on: May 13, 2016, 07:07:12 AM »


This could be the 'black swan' for the economy
Andrew Duguay, senior economist at Prevedere
8 Hours Ago
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We are in the midst of a deceleration in the economy, and the chain of dominoes leading to a recession has started to fall. First, it was a weak global economy. Then, multinationals and business-to-business companies were hit by the resulting decline in global trade and commodity prices. Now, consumers are starting to feel the repercussions as they draw down their growth in spending on discretionary goods and services, which we saw reflected in the first-quarter GDP report.
This is the foreshadowing of a recession. We saw similar indicators prior to recessions in 2001 and 2008. Although there is potential for economic indicators to flip, the current momentum and indicators suggest that the U.S. economy will get worse before it gets better. But we now we have a sense of what the black swan will be for the economy: the weak consumer.
Black Swans
Milton Wordley | Getty Images
Friday's retail numbers are very significant in telling us just how weak the consumer will be in the second quarter. It is the first critical pit stop on the road to either economic recovery or recession and gives us our first taste for where Q2 GDP will land. Consumers have been propping up the economy over the last two quarters, and as the first month of Q2, this number is the first indicator we'll have into the trajectory of consumer sentiment, and whether deceleration has continued. If the numbers fall below expectations, this will require a huge rebound over the next two months in order to move in the direction of economic acceleration in Q3. If numbers are good, this will be the first good sign that the consumer — and the economy — are making a comeback.

A worker carries a Heart Pine plank of lumber in the sawmill at the Goodwin Co. facility in Micanopy, Florida,
Here’s the number I didn’t like in the jobs report: Bernstein
Following the most recent jobs report that showed stagnant wage growth, there is reason to believe that retail numbers will not offer an optimistic outcome. Following yet another blow to the economy, there will be three key indicators that will most impact consumers (and the economy): wages, inflation and consumer sentiment.
Average weekly earnings for nonsupervisory employees are only 1.3 percent above year-ago levels and slowing. Wage inflation has lost a full percentage point since the beginning of year, bringing us to the lowest rate of wage growth recorded since 2009, when we were bottoming out from recession. Consumers are somewhat protected by the fact that overall price inflation is down, so they are not faced with higher prices at the grocery store or gas pump, but most people's feelings about wealth are likely in nominal terms. Someone who doesn't get a raise feels worse than a person who gets a 5-percent raise, even if consumer prices are falling for the first person and are rising at a 6-percent rate for the second person. This lack of "nominal" wage growth can have impacts on consumer behavior and thought, and so far in 2016, we have seen deceleration in consumer sentiment, a big driver of future retail sales. People no longer feel better than last year, so why would they spend more?
Roller coaster risk tolerance
Buckle up: Stocks could drop 25% or more
The critical factor that could tip things from cautious to very problematic is if price inflation starts to kick up. This hasn't happened yet, so it is a hypothetical, but given how much prices have fallen and that most commodities have developed some floor over the past six months, it wouldn't be unreasonable for prices to regain some traction in 2016. This is especially true with monetary policy all over the world being very loose and interest rates low.

For example, oil prices finished their major decent last summer before settling at between $30-40 per barrel. Oil is the basis for other commodities; so while we saw food prices plummet in tandem with oil, we can expect food prices to rise or adjust with oil. Even if oil rises to $50 a barrel as high cost production is cut around the world, it is a 25-percent to 65-percent increase over this winter's prices. That could certainly move the needle on the consumer-price index and hurt the consumer.

While many economists remain optimistic about the economy given the history of a weak first quarter over the past five years, we have clear indicators that our current economic scenario is not vastly different from the early stages in 2001 and 2008. Consumer sentiment will be key in determining whether we in the midst of a weak economy, or in fact on the road to recession.

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RECESSION
« on: May 13, 2016, 07:07:12 AM »

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Re: RECESSION
« Reply #1 on: May 13, 2016, 07:07:58 AM »



Retailers ringing the recession alarm
Krystina Gustafson   | @KrystinaGustafs
4 Hours Ago
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Even industry executives can't figure out what's wrong with retail.

After posting their steepest quarterly same-store sales declines since the recession, management at both Kohl's and Macy's said they were scratching their heads over the disconnect between the improving economy, and a pullback in traffic and spending at their stores in the first quarter.

During a conference call with analysts on Thursday, Kohl's CEO Kevin Mansell said the company is having a "hard time determining" how much of its 3.9 percent comparable-sales drop was related to company-specific issues versus the broader economy.

In that vein, Macy's CFO Karen Hoguet on Wednesday told analysts that the management team at the department store, where comparable sales slipped 5.6 percent during the quarter, was "scratching our heads" regarding the chain's soft results.

"I would say that we too are somewhat puzzled by the data that we're seeing on the consumer and the traffic were seeing," she said.


Workers attach a power train of a Chrysler SUV to the chassis on the assembly line at the Jefferson North Assembly Plant in Detroit
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Indeed, though the sales performance at these two retailers is conjuring up unwelcome memories of the most recent recession, the state of the consumer has substantially improved. In April, the nation's unemployment rate held steady at 5 percent, half of what it was during the throes of the recession in 2009. Stock markets — though they've had a shaky run in 2016 — are well off their troughs during the crisis. The housing market also remains on more solid footing.

"I don't think they're [consumers] of the same mindset," said Ken Perkins, president of Retail Metrics. "The sky really was falling in '09."

That, then, begs the question: Why are some retailers' sales performances reminiscent of that era?

Pedestrians pass in front of Macy's flagship store in Herald's Square, New York.
Getty Images
Pedestrians pass in front of Macy's flagship store in Herald's Square, New York.
Economists pointed to several issues that are holding back spending on traditional merchandise. For one, though consumers are no longer in the dire financial straits that caused their spending to turn catatonic, the recession's lingering effects are still damaging their psyches, Perkins said. That has resulted in a higher savings rate, which has stayed at 5 percent or higher for the past four months reported.

For another, consumer spending patterns have shifted away from a mentality of accumulating stuff, to one of need-based replenishment purchases, Perkins said.

Not only that, but the costs of rent and health care have risen, causing Americans to spend more of their income on those needs, said Jack Kleinhenz, chief economist for the National Retail Federation, the retail industry's trade group.

When consumers do dip into their discretionary income, they — particularly millennials — are opting to do so for things like services, concert tickets or dining out. More broadly speaking, they're also spending on home renovations and automobiles.

"They have the ability to spend," Kleinhenz said. "People are buying big-ticket items and cars are still very attractive."

Paul Ashworth, chief North American economist at Capital Economics, said there is no reason to suspect that there will be a big collapse in consumer spending. Though there have been some ups and downs in macroeconomic fundamentals, there have been some "fairly decent gains" in income over the past year, he said.

"I'd expect that to continue," Ashworth said, saying that should translate into increased consumer spending.


A shopper at a Kohl's store in Jersey City, NJ.
Retail recession? Why Kohl's sales miss was so significant
People walk past Macy's flagship store in Manhattan, New York.
Macy's dismal results bring back memories of the financial crisis
An exterior view of fashion retailer Gap's Oxford Street store on February 11, 2016 in London.
Gap warns sales, earnings will fall sharply below estimates as store traffic slowed

Perkins added that while some economists point to the higher savings rate as a negative for consumer spending, he would argue it gives shoppers more spending power in the future.
Still, there are a few negatives that could depress consumer spending, though Ashworth said he hasn't seen signs of their impact yet. They include still-low but rising gas prices and a potential pullback in spending over political concerns. The squeeze on the middle class and lower pay for the millennial generation are also playing a role, Perkins said.

Aside from macroeconomic concerns, analysts agreed that several of the woes retailers are grappling with are self-inflicted. Just check your inbox. It's likely filled with store promotions.

The deflationary spiral department stores and others in the space are stuck in is denting their gross margins, Kleinhenz said. It also means a company has to sell more product to generate sales gains. These problems are exacerbated on retailers' bottom lines, thanks to a series of minimum wage hikes and competition for workers.

"You're getting squeezed because you have to pay these people more... but then you can't sell your product at a higher level because it's highly competitive," Kleinhenz said.

Retailers who filed Chapter 11—Where they are now

Glenn Koenig | Los Angeles Times | Getty Images
That retail earnings season kicks off in earnest with the major department stores doesn't help the conversation surrounding the sector. Whereas department stores such as Macy's and Kohl's have recently drummed up a heavy round of criticism, results from companies who are later to report — including Home Depot, Lowe's and TJX — tend to fare better.

"Given that they're [department stores] the first ones out the door, they put a more negative spin on the whole retail landscape," Perkins said. He added that he expects to see better numbers come out of the aforementioned retailers when they report next week.

"If they show some really weak numbers I would be much more alarmed," Perkins said, adding that he doesn't expect that to be the case. His firm expects Lowe's and Home Depot, for example, to report comparable sales growth closer to 5 percent.

In the case of Kohl's and Macy's, both grappled with their own set of issues during the quarter. Kohl's management said poor marketing hurt its results, while slow tourism took a bite out of Macy's sales.

And for both, unseasonable weather — which bore much of the blame for the industry's fourth-quarter weakness — played a role, as a chilly March and April held back spending on warm-weather apparel.

"It's going to be a continued difficult slog, at least in the first half, against a relatively decent macro backdrop, which has got to be concerning to these guys," Perkins said

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Re: RECESSION
« Reply #2 on: May 13, 2016, 07:24:29 AM »



Stop Blaming Consumers, They Can't Help It!
Tyler Durden's pictureSubmitted by Tyler Durden on 05/12/2016 17:05 -0400

BLS Census Bureau Consumer Credit CPI Personal Consumption Reality Recession recovery Savings Rate


 
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Submitted by Lance Roberts via RealInvestmentAdvice.com,

Stop Blaming Consumers, They Can’t Help It

Since 2009, mainstream economists, the media, and the Fed have continued to prognosticate a resurgence of economic growth. Yet each year, as shown in the chart of Fed forecasts below, such predictions have repeatedly overstated reality.

FOMC-Economic-Forecasts-031616

Since the economy is almost 2/3rds driven by consumption, it was only a function of time before these same individuals, consistently wrong, lash out at those directly responsible for their shortcomings – the consumer. As noted by Robert Samuelson via The Washington Post:

“American consumers aren’t what they used to be — and that helps explain the plodding economic recovery. It gets no respect despite creating 14 million jobs and lasting almost seven years. The great gripe is that economic growth has been held to about 2 percent a year, well below historical standards. This sluggishness reflects a profound psychological transformation of American shoppers, who have dampened their consumption spending, affecting about two-thirds of the economy. To be blunt: We have sobered up.”
While Robert is correct about consumers not being what they used to be, he is wrong about the reasoning why.

Yes, the economy has created 14 million jobs since the last recession but it has not been the economic nirvana that such a number would seemingly reflect. This is because the majority of the jobs created have been in lower wage-paying industries which has suppressed overall wage growth which is lower today than it was in 2000. Furthermore, while 14 million jobs have been created, the working-age population has grown by 17 million.

Employment-PopGrowth-Jobs-051216

Of course, the problem becomes more apparent when you realize that 1-in-5 families have ZERO members employed. In other words, it is not a lack of a desire to consume but an inability to do so.

This problem is exacerbated by the lack of wage growth since the turn of the century. As shown in the chart below, the 2-year average of median incomes in the United States, as reported by the Census Bureau, has fallen since the turn of the century and is now only slightly higher than it was in 1995.

Incomes-2-year-avg-median-051216

Simply, it is hard to consume MORE, when you are earning less.

 

Inflationary Reality

Of course, earning less is only one part of the problem. If you are earning less but the cost of maintaining a “standard of living” is rising, the deviation between incomes and outflows becomes more problematic.

There has long been a realization that inflation, as reported by the Government via the Consumer Price Index, is flawed. For the majority of Americans, the cost of living has historically been substantially higher than what the government reported it to be as rising healthcare and insurance costs, college tuition and taxes have sapped what bit of discretionary income may have been available.

Just recently Rob Arnott and Lillian Wu via Research Affiliates discussed this exact problem.

“Surveys suggest that the average American’s daily experience [of inflation] may be quite different. One-year consumer inflation expectations have been consistently higher than trailing and realized inflation over the last 20 years, and higher than more recent market-based inflation expectations, measured by one-year swap rates. Figure 1 shows how this divergence has grown larger since the financial crisis, suggesting the average household might have been feeling even greater pain during the recovery process than has been believed.“
 Wheres-the-Beef_FIGURE-1_OVERLAY

“Since 1995, households have expected inflation to be, on average, 3.0%, whereas realized inflation has been around 2.2%, leaving an inflation “gap” of almost 0.8%. What explains this gap? The following is our hypothesis. The four “biggies” for the average American are rent, food, energy, and medical care, in approximately that order. These “four horsemen” have been galloping along at a faster rate than headline CPI. According to the BLS definition, they compose about 60% of the aggregate population’s consumption basket, but for struggling middle-class Americans, it’s closer to 80%. For the working poor, spending on these four categories can stretch to as much as 90% of total spending. Families have definitely been feeling the inflation gap, that difference between headline CPI and inflation in the prices of goods they most frequently consume.”
The second highlighted part of the quote above is crucial. For the middle-class and working poor, which is roughly 80% of households, rent, energy, medical and food comprise 80-90% of the aggregate consumption basket.

Despite claims by the current Administration that the “economy is back,” for a large majority of Americans they are in worse shape financially than they were eight years ago. As I wrote previously:

“While the mainstream media continues to tout that the economy is on the mend, real (inflation-adjusted) median net worth suggests that this is not the case overall.”
Fed-Survey-2013-NetWorth-091014

 

All Tapped Out

No. Consumers are most likely not saving more.

Recently, there have been many articles pointing to the rising saving rate, as reported by the BEA, as the reason why consumers are spending less.

Savings-Rate-051216

As shown, the savings rate, while higher than it was in prior to the financial crisis, is still well below levels that would signify a more healthy household balance sheet. However, I suspect that even the current increase in the personal savings rate, as reported by the BEA, is wrong.

Given the lack of income growth and rising costs of living, it is unlikely that Americans are actually saving more. The reality is consumers are likely saving less and may even be pushing a negative savings rate.

I know suggesting such a thing is ridiculous. However, the BEA calculates the saving rate as the difference between incomes and outlays as measured by their own assumptions for interest rates on debt, inflationary pressures on a presumed basket of goods and services and taxes. What it does not measure is what individuals are actually putting into a bank saving or investment account. In other words, the savings rate is an estimate of what is “likely” to be saved each month.

However, as we can surmise, the reality for the majority of American’s is quite the opposite as the daily costs of maintaining the current standard of living absorbs any excess cash flow. This is why I repeatedly wrote early on that falling oil prices would not boost consumption and it didn’t.

As shown in the chart below, consumer credit has surged in recent months.

Debt-Consumer-Wages-PCE-051216

Here is the other problem. While economists, media, and analysts wish to blame those “stingy consumers” for not buying more stuff, the reality is the majority of American consumers have likely reached the limits of their ability to consume. This decline in economic growth over the past 30 years has kept the average American struggling to maintain their standard of living.

Debt-Consumption-Wages-051216

As shown above, consumer credit as a percentage of total personal consumption expenditures has risen from an average of 20% prior to 1980 to almost 30% today. As wage growth continues to stagnate, the dependency on credit to foster further consumption will continue to rise. Unfortunately, as I discussed previously, this is not a good thing as it relates to economic growth in the future.

“The massive indulgence in debt, what the Austrians refer to as a “credit induced boom,” has likely reached its inevitable conclusion. The unsustainable credit-sourced boom, which led to artificially stimulated borrowing, has continued to seek out ever diminishing investment opportunities.”
Ultimately these diminished investment opportunities repeatedly lead to widespread malinvestments. Not surprisingly, we clearly saw it play out “real-time” in everything from sub-prime mortgages to derivative instruments which were only for the purpose of milking the system of every potential penny regardless of the apparent underlying risk. We see it playing out again in the “chase for yield” in everything from junk bonds to equities. Not surprisingly, the end result will not be any different.

So, don’t blame those poor consumer’s for not spending – they are spending everything they have and then some.

Just some things to think about

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Re: RECESSION
« Reply #3 on: May 13, 2016, 07:30:23 AM »



World's Most Bearish Hedge Fund Manager: "I Think Something Has Changed"
Tyler Durden's pictureSubmitted by Tyler Durden on 05/12/2016 16:48 -0400

Carl Icahn High Yield Japan Nikkei Recession Renminbi Technical Indicators Trade Deficit Yen


 
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One month ago, when we updated on the performance of Horseman Global, what until recently was the world's most bearish hedge fund with a record net short exposure of -98%...



... at least until Icahn Enterprises emerged with its even more gargantuan -149% net short...



 

... we cited fund CIO Russell Clark who observed the fund's dramatic -9.6% drop in the month of March, and made it clear that he wasn't going anywhere because he was confident that the move was nothing but a short squeeze, which - if anything - made Clark even more bearish.

I can hear you say, how do you know this is just a short squeeze, and not the beginning of something much more substantial? While equities are trying to send a bullish tune, the 200 day moving average is now trending down for S&P, Dax and the Nikkei. This is not bullish. Furthermore, yield curves in the US, Japan and Europe have flattened. This is not bullish. Yen is rallying. This is not bullish. We have seen substantial covering by the market. This is not bullish.
 
To my mind, if you want to be short, this looks about as good as it gets.
One month later and not everything is working out according to plan because after last month's nearly 10% drop, the losses continued and Horseman lost another 4.3% in April and -5.1% YTD after being up as much as 10% in the first two months of the year.



 

What happened? Well, as Clark puts it ever so well, "I think something has changed."

Your fund fell 4.29% net last month.
 
To lose 4.29% last month was a bit of a surprise to me, as most of the technical indicators I use indicated that the short squeeze was largely over at the end of March, and yet it continued into April.
 
The question to be answered after a drawdown is always the same, “Has something changed?”. In this case, I think something has changed. The overwhelming theme of the market for the past 18 months or so has been that of a strong dollar. European and Japanese markets had performed well as their currencies weakened versus the dollar, and commodity prices were generally weaker. Furthermore the strong dollar put pressure on the renminbi and encouraged thoughts of a Chinese financial crisis.
 
I was aware of the consensus in the market and put hedges in place to offset a weak dollar. I have had since last year long euro and long yen positions in the currency book, while having short Japanese and European exporters in the short book since last year. These hedges have performed very well, and have been the main reason that despite the drawdown, the fund has managed to hold on to most of the gains from last year.
 
The message that I am getting from the market, the “something” that has changed is that the US dollar is no longer a strong currency. Typically the US dollar falls when its economic cycle begins to roll over. Many of the indicators that I look at show the US is either in or heading for recession. These indicators include; the US trade deficit ex petroleum products which is back to 2006 levels; US capacity utilisation peaking in late 2014 and declining rapidly ever since; and US high yield have generally been widening since 2014.
 
Historically, a weak US dollar is good for commodity prices, and it is also good for emerging markets. This has played out this year, where we have suffered pain on emerging markets and commodity shorts, but have gained on Japanese and European shorts. Given that the US dollar could potentially fall significantly from here, it seems to me that we should take what have been hedges to our portfolio (that is long euro and yen, short Japanese and European equities), and make this the core of the portfolio, while our emerging market and commodity related shorts should become the hedges.
 
Having realised this late in the month, we have already made substantial progress to making this change in the portfolio. We have increased our long euro position to 50% of the fund, and long yen to 30% of the fund. We have closed a number of emerging market financial shorts, and opened European financial shorts. We are now net short European financials. We have closed a number of US listed oil shorts and replaced them with shorted euro denominated oil stocks.
 
It is possible that the US dollar could be so weak, that the US equity bull markets can continue, but it would probably lead to depression and crisis in Europe and Japan. At the beginning of the year, an investor asked me to sum up current central bank policy. I described it as a circular firing squad, where at best perhaps one economy could escape, but most likely everyone dies. The gun that they hold is competitive devaluation. We know now who is most likely to live and who is most likely to die, and are making the appropriate changes.
 

 
Your fund remains short equities and long bonds.
And so it does, because after realizing that the "strong dollar" thesis is no longer dominant case, did Horseman cover any shorts? Not at all, and in fact quite the contrary: as of April, the hedge fund is for the first time in its history more than 100% net short, something Carl Icahn would surely appreciate.

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Re: RECESSION
« Reply #4 on: May 13, 2016, 07:44:22 AM »



Deutsche Bank thinks this is the biggest threat to the economy

By Sue Chang
Published: May 12, 2016 5:08 p.m. ET

     11 
Markets are not prepared to deal with this emerging risk
Shutterstock
Threat? What threat?
The Federal Reserve is trying to send the markets a message, but one Deutsche Bank economist says people are just not getting it — there is a looming threat to the economy and it’s not another recession or a crisis.

“Many clients I meet worry that the biggest macro risk on the horizon is another financial crisis,” said Torsten Slok, Deutsche Bank’s chief international economist.

But the bigger threat, according to Slok, is accelerating inflation.


“This is what the Fed is trying to tell us when they repeatedly point out that we are near full employment,” he said.

Slok expects inflation to pick up in the coming months on the back of building wage pressure, but investors are mostly unprepared nor understand how it will impact the Federal Reserve’s monetary policy.

“Combining the upward pressure on wages with the ongoing depreciation of the dollar, I think we will continue to see upward pressure on core personal consumption expenditures over the coming quarters,” he said.

Wages have been ticking higher in recent months, with average wages up 0.3% to $25.53-an-hour in April, while hourly pay increased 2.5% in the past 12 months. Data also showed that the labor-force participation dropped for the first time since last fall to 62.8%.

The decline in the labor participation rate is likely to be a consistent trend in the foreseeable future due to aging demographics, leading to a tighter labor market, according to Michael Pearce, global economist at Capital Economics.

Meanwhile, the PCE index, the Federal Reserve’s preferred inflation gauge, rose 0.8% year-over-year last month, following a 1% jump in March. The consumer price index edged up 0.1% in March, on a seasonally adjusted basis, after slipping 0.2% in February.

Read: Why inflation might be this market’s bogeyman

Cleveland Fed President Loretta Mester said Thursday that recent data support the Fed’s view that inflation will gradually accelerate over time, and noted that the PCE index rose 1% in the first quarter compared with 0.2% in the first quarter of last year.

Slok isn’t the only economist to sound the alarm on inflation.

Perma-bear Albert Edwards of Societe Generale likewise predicted that accelerated inflation is likely to force the Fed to resume its tightening cycle. But unlike Slok, Edwards believes this uptick in inflation is ephemeral and if the central bank does opt to hike rates, it will inevitably push the U.S. economy over the edge.

“They will, like Don Quixote, tilt their interest-rate lance at some imaginary inflation windmills, which merely represent temporary end-cycle phenomena, before a slump into outright deflation in the next recession,” he said in a note.

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Re: RECESSION
« Reply #5 on: May 15, 2016, 02:38:57 PM »



1 Big Sign North America Has A Recession Incoming
The Huffington Post Canada  |  By   Daniel Tencer
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Posted: 05/14/2016 2:41 pm EDT Updated: 05/14/2016 3:59 pm EDT

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When unsold goods start piling up in warehouses, that’s a pretty good sign the economy is slowing down. And that’s what’s happening in the U.S. right now.

The ratio of business inventories to sales has risen to near recessionary levels, according to data from the Commerce Department released Friday.

“Simply put, this will not end well,” writes the famously bearish Zero Hedge blog, which flagged the new data on Friday.

x

inventories to sales ratio
Unsold goods are piling up: The ratio of business inventories to sales has risen to levels seen during recessions. Shaded areas on the chart mark previous recessions. (Chart: Federal Reserve Bank of St. Louis)

But Zero Hedge isn’t the only one seeing the possibility of a U.S. recession. Economists surveyed by the Wall Street Journal see an elevated chance the economy will shrink over the next year.

The latest survey found a 20-per-cent chance of a recession in the U.S. over the next year. While those are low odds, they are still double the 10-per-cent chance economists saw as recently as last fall.

“Decelerating employment growth, growing uncertainty and sputtering GDP growth does not portend well,” Chad Moutray, chief economist at the National Association of Manufacturers, told the WSJ.

recession odds

Would impact Canada

A U.S. recession, if it happened, would pull the legs out from under Canada’s rotation away from oil and likely drag the country into its own recession.

Economists had expected that, as oil prices fell and the loonie dropped, Canada would see a boost in exports to the U.S., the country’s largest trading partner, offsetting the damage from tanking oil prices.

But that trend is now fizzling. Canadian exports took a deep dive in March, pushing Canada's trade deficit with the rest of the world to a record high of $3.4 billion, up from $2.5 billion in February. That unexpectedly bad report caused many economists to lower their forecasts for Canadian growth.

"Canada was never going to escape unscathed from a slowdown in U.S. imports, and for March that meant a 4.8 per cent collapse in exports," CIBC economist Nick Exarhos wrote.

Still, many economists see this slowdown as a temporary blip.

With the Canadian dollar expected to remain below the 80-cent U.S. mark for some time, “Canada's export sector should remain a key source of strength over the medium term,” TD Bank said in a recent client note.

Most private sector forecasters are calling for GDP growth in Canada to come in around the 1.5-per-cent range this year.

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Re: RECESSION
« Reply #6 on: May 18, 2016, 03:47:36 PM »



Undeniable Evidence That The Real Economy Is Already In Recession
Tyler Durden's pictureSubmitted by Tyler Durden on 05/18/2016 02:00 -0400

Apple Bank of America Bank of America Federal Reserve goldman sachs Goldman Sachs Great Depression Reality Recession Yield Curve


 
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Submitted by Michael Snyder via The Economic Collapse blog,

You are about to see a chart that is undeniable evidence that we have already entered a major economic slowdown.

In the “real economy”, stuff is bought and sold and shipped around the country by trucks, railroads and planes.  When more stuff is being bought and sold and shipped around the country, the “real economy” is growing, and when less stuff is being bought and sold and shipped around the country, the “real economy” is shrinking.
I know that might sound really basic, but I want everyone to be on the same page as we proceed in this article.

Just because stock prices are artificially high right now does not mean that the U.S. economy is in good shape.  In fact, there was a stock rally at this exact time of the year in 2008 even though the underlying economic fundamentals were rapidly deteriorating.  We all remember what happened later that year, so we should not exactly be rejoicing that precisely the same pattern that we witnessed in 2008 is happening again right in front of our eyes.

During the month of April, the Cass Transportation Index was down 4.9 percent on a year over year basis.  What this means is that a lot less stuff was bought and sold and shipped around the country in April 2016 when compared to April 2015.  The following comes from Wolf Richter…


Freight shipments by truck and rail in the US fell 4.9% in April from the beaten-down levels of April 2015, according to the Cass Transportation Index, released on Friday. It was the worst April since 2010, which followed the worst March since 2010. In fact, shipment volume over the four months this year was the worst since 2010.
 
This is no longer statistical “noise” that can easily be brushed off.
Of course this was not just a one month fluke.  The reality is that we have now seen the Cass Shipping Index decline on a year over year basis for 14 consecutive months.  Here is more commentary and a chart from Wolf Richter…

The Cass Freight Index is not seasonally adjusted. Hence the strong seasonal patterns in the chart. Note the beaten-down first four months of 2016 (red line):
 
Cass Freight Index - Wolfstreet
This is undeniable evidence that the “real economy” has been slowing down for more than a year.  In 2007-2008 we saw a similar thing happen, but the Federal Reserve and most of the “experts” boldly assured us that there was not going to be a recession.

Of course then we immediately proceeded to plunge into the worst economic downturn since the Great Depression of the 1930s.

Traditionally, railroad activity has been a key indicator of where the U.S. economy is heading next.  Just a few days ago, I wrote about how U.S. rail traffic was down more than 11 percent from a year ago during the month of April, and I included a photo that showed 292 Union Pacific engines sitting in the middle of the Arizona desert doing absolutely nothing.

Well, just yesterday one of my readers sent me a photograph of a news article from North Dakota about how a similar thing is happening up there.  Hundreds of rail workers are being laid off, and engines are just sitting idle on the tracks because there is literally nothing for them to do…

North Dakota Railroad Engines Idle

Intuitively, does it seem like this should be happening in a “healthy” economy?

Of course not.

The reason why this is happening is because businesses have been selling less stuff.  Total business sales have now been declining for almost two years, and they are now close to 15 percent lower than they were in late 2014.

Because sales are way down, unsold inventories are really starting to pile up.  The inventory to sales ratio is now close to the level it was at during the worst moments of the last recession, and many analysts expect it to continue to keep going up.

Why can’t people understand what is happening?  So far this year, job cut announcements are up 24 percent and the number of commercial bankruptcies is shooting through the roof.  Signs that we are in the early chapters of a new economic downturn are all around us, and yet denial is everywhere.

For instance, just consider this excerpt from a CNBC article entitled “This key recession signal is broken“…

Treasury yields are behaving as if they are signaling a recession, but strategists say this time it’s more likely a sign of something else.
 
The market has been buzzing about the flattening yield curve, or the fact that yields on longer duration Treasurys are getting closer to yields on shorter duration securities.
 
In the case of 10-year notes and two-year notes, that spread was the flattest Friday than it has been on a closing basis since late 2007. The yield curve had turned negative in 2006 and stayed there for months in 2007 before turning higher ahead of the Great Recession. The spread was at 95 at Friday’s curve but widened Monday to more than 96.
Treasury yields are very, very clearly telling us that a new recession is here, but because the “experts” don’t want to believe it they are telling us that the signal is “broken”.



 

 

For many Americans, all that seems to matter is that the stock market has recovered from the horrible crashes last August and earlier this year.  But in the end, I am convinced that those crashes will simply be regarded as “foreshocks” of a much greater crash in our not too distant future.

But if you don’t want to believe me, perhaps you will listen to Goldman Sachs.  They just came out with six reasons why stocks are about to tumble.

Or perhaps you will believe Bank of America.  They just came out with nine reasons why a big stock market decline is on the horizon.

To me, one of the big developments has been the fact that stock buybacks are really starting to dry up.  In fact, announced stock buybacks have declined 38 percent so far this year…

After snapping up trillions of dollars of their own stock in a five-year shopping binge that dwarfed every other buyer, U.S. companies from Apple Inc. to IBM Corp. just put on the brakes. Announced repurchases dropped 38 percent to $244 billion in the last four months, the biggest decline since 2009, data compiled by Birinyi Associates and Bloomberg show. “If the only meaningful source of demand in the market is companies buying their own shares back, then what happens if that goes away?” asked Brad McMillan, CIO of Commonwealth “We should be concerned.”
Stock buybacks have been one of the key factors keeping stock prices at artificially inflated levels even though underlying economic conditions have been deteriorating.  Now that stock buybacks are drying up, it is going to be difficult for stocks to stay disconnected from economic reality.

A lot of people have been asking me recently when the next crisis is going to arrive.

I always tell them that it is already here.

Just like in early 2008, economic conditions are rapidly deteriorating, but the stock market has not gotten the memo quite yet.

And just like in 2008, when the financial markets do finally start catching up with reality it will likely happen very quickly.

So don’t take your eyes off of the deteriorating economic fundamentals, because it is inevitable that the financial markets will follow eventually

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Re: RECESSION
« Reply #7 on: May 19, 2016, 11:54:06 AM »



The Real Economy Is Already In Recession

The Real Economy Is Already In Recession thumbnail
You are about to see a chart that is undeniable evidence that we have already entered a major economic slowdown.

In the “real economy”, stuff is bought and sold and shipped around the country by trucks, railroads and planes.  When more stuff is being bought and sold and shipped around the country, the “real economy” is growing, and when less stuff is being bought and sold and shipped around the country, the “real economy” is shrinking.

I know that might sound really basic, but I want everyone to be on the same page as we proceed in this article.

Just because stock prices are artificially high right now does not mean that the U.S. economy is in good shape.  In fact, there was a stock rally at this exact time of the year in 2008 even though the underlying economic fundamentals were rapidly deteriorating.  We all remember what happened later that year, so we should not exactly be rejoicing that precisely the same pattern that we witnessed in 2008 is happening again right in front of our eyes.

During the month of April, the Cass Transportation Index was down 4.9 percent on a year over year basis.  What this means is that a lot less stuff was bought and sold and shipped around the country in April 2016 when compared to April 2015.  The following comes from Wolf Richter…

Freight shipments by truck and rail in the US fell 4.9% in April from the beaten-down levels of April 2015, according to the Cass Transportation Index, released on Friday. It was the worst April since 2010, which followed the worst March since 2010. In fact, shipment volume over the four months this year was the worst since 2010.

 

This is no longer statistical “noise” that can easily be brushed off.

Of course this was not just a one month fluke.  The reality is that we have now seen the Cass Shipping Index decline on a year over year basis for 14 consecutive months.  Here is more commentary and a chart from Wolf Richter…

The Cass Freight Index is not seasonally adjusted. Hence the strong seasonal patterns in the chart. Note the beaten-down first four months of 2016 (red line):

 

Cass Freight Index - Wolfstreet

This is undeniable evidence that the “real economy” has been slowing down for more than a year.  In 2007-2008 we saw a similar thing happen, but the Federal Reserve and most of the “experts” boldly assured us that there was not going to be a recession.

Of course then we immediately proceeded to plunge into the worst economic downturn since the Great Depression of the 1930s.

Traditionally, railroad activity has been a key indicator of where the U.S. economy is heading next.  Just a few days ago, I wrote about how U.S. rail traffic was down more than 11 percent from a year ago during the month of April, and I included a photo that showed 292 Union Pacific engines sitting in the middle of the Arizona desert doing absolutely nothing.

Well, just yesterday one of my readers sent me a photograph of a news article from North Dakota about how a similar thing is happening up there.  Hundreds of rail workers are being laid off, and engines are just sitting idle on the tracks because there is literally nothing for them to do…

North Dakota Railroad Engines Idle

Intuitively, does it seem like this should be happening in a “healthy” economy?

Of course not.

The reason why this is happening is because businesses have been selling less stuff.  Total business sales have now been declining for almost two years, and they are now close to 15 percent lower than they were in late 2014.

Because sales are way down, unsold inventories are really starting to pile up.  The inventory to sales ratio is now close to the level it was at during the worst moments of the last recession, and many analysts expect it to continue to keep going up.

Why can’t people understand what is happening?  So far this year, job cut announcements are up 24 percent and the number of commercial bankruptcies is shooting through the roof.  Signs that we are in the early chapters of a new economic downturn are all around us, and yet denial is everywhere.

For instance, just consider this excerpt from a CNBC article entitled “This key recession signal is broken“…

Treasury yields are behaving as if they are signaling a recession, but strategists say this time it’s more likely a sign of something else.

 

The market has been buzzing about the flattening yield curve, or the fact that yields on longer duration Treasurys are getting closer to yields on shorter duration securities.

 

In the case of 10-year notes and two-year notes, that spread was the flattest Friday than it has been on a closing basis since late 2007. The yield curve had turned negative in 2006 and stayed there for months in 2007 before turning higher ahead of the Great Recession. The spread was at 95 at Friday’s curve but widened Monday to more than 96.

Treasury yields are very, very clearly telling us that a new recession is here, but because the “experts” don’t want to believe it they are telling us that the signal is “broken”.



 

 

For many Americans, all that seems to matter is that the stock market has recovered from the horrible crashes last August and earlier this year.  But in the end, I am convinced that those crashes will simply be regarded as “foreshocks” of a much greater crash in our not too distant future.

But if you don’t want to believe me, perhaps you will listen to Goldman Sachs.  They just came out with six reasons why stocks are about to tumble.

Or perhaps you will believe Bank of America.  They just came out with nine reasons why a big stock market decline is on the horizon.

To me, one of the big developments has been the fact that stock buybacks are really starting to dry up.  In fact, announced stock buybacks have declined 38 percent so far this year…

After snapping up trillions of dollars of their own stock in a five-year shopping binge that dwarfed every other buyer, U.S. companies from Apple Inc. to IBM Corp. just put on the brakes. Announced repurchases dropped 38 percent to $244 billion in the last four months, the biggest decline since 2009, data compiled by Birinyi Associates and Bloomberg show. “If the only meaningful source of demand in the market is companies buying their own shares back, then what happens if that goes away?” asked Brad McMillan, CIO of Commonwealth “We should be concerned.”

Stock buybacks have been one of the key factors keeping stock prices at artificially inflated levels even though underlying economic conditions have been deteriorating.  Now that stock buybacks are drying up, it is going to be difficult for stocks to stay disconnected from economic reality.

A lot of people have been asking me recently when the next crisis is going to arrive.

I always tell them that it is already here.

Just like in early 2008, economic conditions are rapidly deteriorating, but the stock market has not gotten the memo quite yet.

And just like in 2008, when the financial markets do finally start catching up with reality it will likely happen very quickly.

So don’t take your eyes off of the deteriorating economic fundamentals, because it is inevitable that the financial markets will follow eventually

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Re: RECESSION
« Reply #8 on: June 04, 2016, 05:22:49 PM »



Former McDonald's CEO: We're in a small-business recession
Jacob Pramuk   | @jacobpramuk
12 Hours Ago
CNBC.com
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SHARES
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COMMENTSJoin the Discussion

A weak May jobs report raised concerns about the labor market. But a former McDonald's chief executive thinks the U.S. economy may be in worse shape than it seems.

"I think we're in a small-business recession, and if we don't start opening up the opportunity for entrepreneurs to grow their business, we're going to continue see this drop in jobs. We need to energize small businesses," Ed Rensi told CNBC's "Closing Bell" on Friday.
The U.S. economy added just 38,000 jobs in May, the Labor Department said Friday. The number came in well below economists' expectations for about 162,000, according to Thomson Reuters.

Store closing Sports Authority
Daniel Acker | Bloomberg | Getty Images
The headline unemployment rate dipped to 4.7 percent. A more encompassing rate held steady at 9.7 percent.

Those figures came after lackluster gross domestic product growth in the first quarter.

Multiple factors could continue to drag on entrepreneurship and small-business hiring, Rensi said. He cited taxation, regulations and minimum wage increases, among others.


A Cummins employee installs a wiring harness at the company's engine plant in Walesboro, Ind.
Mayday! Job growth plummets heading into summer
A representative, left, shakes hands with a job seeker during a Job News USA career fair
Charts: The real story on the unemployment rate

The federal minimum wage is $7.25 an hour, though some cities and states have set a higher rate. Democratic presidential candidate Sen. Bernie Sanders of Vermont and others have argued for a $15-per-hour federal minimum wage saying it will increase consumer spending and lower income inequality.

Rensi contended that technology has replaced workers for decades, and "will accelerate if these minimum wage rates end up at $15 an hour." However, he said states should regulate minimum wages because they understand consumers and economic demands of the area better.

Wages should be higher in more expensive localities, he said

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Re: RECESSION
« Reply #9 on: June 05, 2016, 02:34:40 PM »



When Will The Recession Start: Deutsche Bank's Disturbing Answer

Tyler Durden's picture
by Tyler Durden - Jun 4, 2016 8:41 PM
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Just yesterday, when looking at the latest sudden drop in the US employment, JPM warned that as a result of the dramatic downshifting in the US economy, the bank's recession indicator had just hit a new cycle high of 36%.



This is what JPM said: "This morning's employment report also raised the recession probabilities, although for counterintuitive reasons. We do not include the payrolls number in the recession model because it is subject to larger revisions than other labor market data. But the unemployment rate enters the model in two ways. As a near-term indicator, we watch for increases in the unemployment rate that occur near the beginning of recessions. So this morning's move down in the unemployment rate lowered the recession probability in our near-term model. But we also find the level of the unemployment rate to be one of the most useful indicators ofmedium-term recession risk. So the move down in unemployment raises the model's view of the risk of economic overheating in the medium run and raises the "background risk" of recession."

So we have unemployment. However, a far bigger risk to the US economy is a topic we have flagged since last fall: peak, and now sliding, profits.


Because as DB's Dominic Konstam notes something every high school econ student knows, companies cutting headcount in rising numbers, while beneficial for profits at least in the short run, has negative impacts for long-run aggregate demand, to wit:

If aggregate demand is steady, then slower employment growth could well stabilize or improve productivity. However, the rub as always is that workers are also consumers, so as fewer jobs are created (or jobs are cut), then aggregate demand tends to decline.
As such, declining profits and a slowing work force (as the exodus from the labor force returns) is the worst possible feedback loop for an economy; it is the one that the US finds itself in now, ironically just as the Fed hopes to telegraph the all clear by continuing to hike rates and in doing so confirming just how misplaced the Fed's optimism has been all along.

So while the BLS was finally forced to admit the truth about the US labor market yesterday, here is a reminder from DB's most unexpected "bear", Joe Lavorna, that "profit margins have likely peaked":

The broadest measure of operating profits is pre-tax corporate profits with inventory valuation (IVA) and capital consumption adjustments (CCAdj). As the first chart below indicates, this series shows substantial compression of corporate margins.
 

 
As illustrated in the above charts, profits per worker have generally trended higher over time. This is a function of productivity gains and inflation. Notice that our ratio is measured in nominal dollars. In the current business cycle, margins peaked at $18,403 per worker in Q3 2014. This compares to a current ratio of $15,615 per worker as of Q1 2016. Margins have fallen because corporate profit growth has declined while private sector job growth over the intervening period has been very steady, running at around a 2.3% annualized rate.
 
Within corporate profits, the majority of the decline has been in domestic rather than overseas profits. This means that recent margin compression has had less to do with the strengthening dollar, and perhaps more to do with weak domestic demand. From Q3 2014, when profit margins peaked, to Q1 2016, domestic profits have declined by a little over -$175 billion. As we can see in the charts below, this is nearly double the -$88 billion decline in profits from outside the US. Not surprisingly, the decline in profit growth has occurred alongside a deceleration in domestic demand. In fact, the year-over-year growth rate of real final sales to private domestic purchasers, our favorite indicator of underlying demand, peaked at 3.6% in Q4 2014 and has since slowed to 2.6% as of last quarter.
 

 


If it were only jobs and profits, maybe the Fed would have some degree of control, even if it is reflexive. Normally tightening happens after companies start competing for scarce labor resources, generating cost inflation at which point the Fed raises rates to ease inflation pressures and un-compress cost pressures; only this time the Fed is putting the cart in front of the horse and is hoping that by tightening it will somehow prompt wage inflation which has been the biggest variable missing from the US economy. By way of reference, the last time the unemployment rate was 4.7% in November 2007, average hourly earnings were growing 3.1% Y/Y without a raise in the minimum wage; now wages are rising at 2.5% mostly thanks to the boost for the lowest-paid workers.

However, what is very different this time, is that companies have taken on debt in the current business cycle. Make that lots of debt.  As DB calculates, nonfinancial corporate debt has increased by $2 trillion from its trough in Q4 2010 through Q4 2015. And here things get interesting because as shown in the chart below, the ratio of nonfinancial corporate debt to nominal GDP is at its highest level since Q2 2009, when the economy was still in recession and nominal output was substantially depressed. As LaVorgna puts it, "this is one reason why the Fed needs to be very cautious with respect to the pace of policy normalization."



While unnecessary, the following observation is mostly for the benefit of the Fed which continues to shock analysts with its level of cluelessness:

An over-tightening of credit conditions would be problematic for a highly-levered corporate sector, especially if final demand were to remain weak. If capital costs were rising in an environment of declining margins, employers would at minimum slow the pace of hiring, and perhaps even cut labor outright. This may already be occurring, given the broad-based weakness of the May employment report.
Which brings us to the question at hand: when will the next recession strike (if it hasn't done so already because according to most manufacturing indicators including factory orders, core capital goods orders, CapEx spending both macro and micro, manufacturing PMI and manufacturing employment, the US manufacturing sector has already been contracting for over a year).


Here is DB's answer:

Profit margins always peak in advance of recession. Indeed, there has not been one business cycle in the post-WWII era where this  has not been the case. The reason margins are a leading indicator is simple:When corporate profitability declines, a pullback in spending and hiring eventually ensues. Normally, margins compress because of cost pressures— namely the labor share of income rises relative to the corporate share of income. Put another way, when companies compete for scarce labor resources, worker pay is bid up. In turn, inflation pressures often surface. This typically induces a monetary policy response—the Fed begins raising interest rates to dampen inflation.
As a reminder, profit margins peaked in Q3 2014. With that in mind, the historical data reveals that the average and median lead times between the peak in margins and the onset of recession are nine and eight quarters, respectively, which as DB concludees "would imply that the economy could enter recession as soon as the second half of this year."



Oops.

To be sure, Deutsche Bank tries to mitigate its disturbing conclusion somewhat - after all the last thing Germany's most "troubled" bank wants is to infurate the Fed even more:

"as we can see in the table on the following page, the time period between the peak in profit margins and the beginning of recession varies substantially across business cycles. Margins can sometimes peak well in advance of the onset of recession, as they did in the 1960s and 1990s business cycles. In the former period, the peak in margins occurred 16 quarters before recession. In the latter episode, the peak occurred 15 quarters ahead of the economy’s entering recession. Conceivably, such a scenario could unfold now."
But... there is always a but...

"However, the current business cycle is already the fourth longest in the post- WWII period, and the corporate debt-to-GDP ratio suggests that imbalances are building."
So, Janet, about that July (or September, or December) rate hike

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Re: RECESSION
« Reply #10 on: June 08, 2016, 02:18:05 PM »



BREAKING NEWS
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RALPH LAUREN TO CLOSE 50 STORES, CUT 1000 JOBS
FAA WARNS OF GPS OUTAGES THIS MONTH DURING MYSTERIOUS TESTS ON THE WEST COAST
CHINESE JET MAKES ‘UNSAFE’ INTERCEPT OF AIR FORCE PLANE
HILLARY CLINTON SEALS NOMINATION ON 6/6/16
HOMELAND SECURITY URGES DC RESIDENTS TO HAVE EVACUATION PLAN
MASSIVE FIRE ENGULFS SOUTH AFRICA’S JESUS DOME MEGACHURCH
MISSING NASA SCIENTIST FOUND DEAD, NUMBER CONTINUES TO GROW
PUTIN SENDS ATTACK SUB LOADED WITH MISSILES TO ENGLISH CHANNEL
THE LEADING INDICATOR OF RECESSION HAS JUST HAPPENED
The Leading Indicator Of Recession Has Just Happened

Reuters-stock-market-brokers
7 JUNE, 2016
(Reported By Michael Snyder) What you are about to see is major confirmation that a new economic downturn has already begun. Last Friday, the government released the worst jobs report in six years, and that has a lot of people really freaked out. But when you really start digging into those numbers, you quickly find that things are even worse than most analysts are suggesting. In particular, the number of temporary jobs in the United States has started to decline significantly after peaking last December.

 
This is important is because the number of temporary jobs started to decline precipitously right before the last two recessions as well. You see, when economic conditions start to change, temporary workers are often affected before anyone else is. Temporary workers are easier to hire than other types of workers, and they are also easier to fire. READ MORE

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Re: RECESSION
« Reply #11 on: June 10, 2016, 07:10:50 AM »



America needs to get serious about the looming recession
 
Ryan Cooper
 Fanatic Studio / Alamy Stock Photo
June 9, 2016

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Is America headed for another economic crash?

From late 2010 through 2014, there was a gradual but steady increase in economic strength, with each year slightly better than the last. It was nowhere near good enough to completely undo the damage of the Great Recession, but it seemed like things were heading in the right direction.

But in late 2015, progress began to plateau. The previous year, new job creation had averaged over 250,000 per month, but 2015 only managed about 229,000. Still, that was strong enough that the Federal Reserve decided it could raise interest rates in December for the first time since the financial crisis, thus slowing the economy to prevent future inflation.

It's looking increasingly clear that this was a serious mistake. The Fed — and the rest of the government — needs to start thinking about what to do when the next recession strikes.

Let's go through some numbers. Job creation has stalled badly in 2016, averaging only 150,000 per month thus far — worse than 2011's figure. May had the weakest jobs number since January of 2010. Other economic data are more mixed (compiled here by Ben Casselman), but overall not very encouraging. The unemployment rate is low, and job openings are up, but actual hires have fallen substantially from their most recent peak. After increasing moderately for most of 2015, wage growth has also stalled, far below a rate consistent with decent productivity growth and a stable labor share of national income.

If you squint, it sort of looks like the economy is bumping up against full capacity. Employers are trying to hire, but they can't find the workers, right? However, the problem with this story is there is not a single whiff of moderate inflation. If the economy is hitting structural constraints, then we ought to see price increases as companies bid against each other for labor and resources. But not only has wage growth stalled, inflation has been consistently below target — for more than three years straight.

Another window into economic health is that of household balance sheets, which have deteriorated alarmingly of late, as Steve Roth points out. Here's a chart of the yearly change in total household net worth, adjusted for inflation:



Decreases in household net worth (when the line goes below the x-axis) tend to predict recessions (the shaded areas) because net worth is a key enabler of consumer spending. There is an entire industry that provides purchasing power to households through various debt instruments — credit cards, home equity loans, and so on. But if household net worth starts to decline, creditworthiness will decrease, leading to a decrease in consumer spending and thence to a recession.

The Fed deserves at least partial blame for this. The basic problem with America's central bank, at least when it comes to monetary policy, is that it has confused timidity with caution. Whether a policy is cautious or not depends critically on the surrounding circumstances. If one is trying to enter the ocean on a rocky beach with heavy surf, it may be much more cautious to take a running leap and aim for the deep water than to do it timidly and be sliced to ribbons on the shallow rocks and barnacles.

Similarly, constantly communicating a desire to halt monetary stimulus and to return to normal interest rates could directly bring about the unwanted outcome by creating an economy-wide expectation that the Fed will halt any economic momentum before it even gets going. A much more cautious strategy would be hyper-aggressive stimulus to get some real momentum going, only then followed by a raise in rates once full employment is firmly established.

As Ryan Avent wrote over four years ago, "Try overshooting for once. Try it!"

At any rate, it's clear that the Fed is completely incorrigible on this point. Absent new personnel or structural reform, they simply aren't going to listen to this reasoning. And that should be worrisome indeed.

MORE PERSPECTIVES
 
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If a new recession strikes, the Fed will be in an even worse position than it was in 2008, when at least interest rates were fairly far from zero. Today, one minor hiccup and we'll be straight back in the zero lower bound sandpit we were stuck in from 2008-15. All that's left at that point is quantitative easing, and that manifestly doesn't work very well — particularly when done timidly, as the Fed has done.

Help from other quarters is also hard to imagine. After the Great Recession, we were lucky enough to have some big Democratic majorities that could pass a large Keynesian stimulus that staved off the worst. But it's highly likely that Republicans will maintain control of the House of Representatives, and they loathe Keynesian reasoning.

Economic expansions never last forever. Another recession is coming, probably sometime in the next presidential term. And this time there could be no real government response

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Re: RECESSION
« Reply #12 on: June 18, 2016, 01:53:22 PM »



A Massive Recession and Donald Trump’s Favorite Color
 06/17/2016 02:26 pm ET | Updated 10 hours ago

Rhett Grametbauer
Producer/Author of film and book ‘25,000 Miles to Glory’; Founder of FoamFingerNation.com
In April, presidential candidate and billionaire Donald Trump predicted a “massive recession“ and a “terrible time” to invest in the stock market. Whether it is Trump’s incessant belief that under his presidency he could erase the $19 trillion United States debt by imposing tariffs on goods originating in Mexico and China, his claim that the United States was once “a nice country because it was based on a gold standard,” or the extravagant décor in his Trump Tower residence in New York, Trump loves gold. A possible Trump presidency could be good for the precious metal and not just because he would need to redecorate the White House in gold.

2016-06-15-1466016298-7108662-whitehouse02.jpg

While economists have balked at the belief that a massive recession is imminent, and that Trump’s economic plan could erase the national deficit, others have postulated a Trump presidency would cause a recession instead of preventing one. The next leader of the free world may or may not be able to avoid a recession. Other signs persist that a recession is likely to greet the next president regardless of their party affiliation. What are these signs and what impact will this have for investors in precious metals?

2016-06-15-1466016399-5565947-preciousmetalsdawnjbennett.jpg

Economists at JPMorgan believe there is a 36% chance that a recession begins within the next 12 months, based on their proprietary model. This percentage is a new for the model that accounts for economic indicators like consumer sentiment, manufacturing sentiment, building permits, auto sales, and unemployment. Recently, the spot price of gold has gone up based on the disappointing news that U.S. companies added far fewer nonfarm payrolls than analysts were projecting.

A recent article in Investopedia attributes uncertainty in Europe, issues within the Chinese economy, debt problems associated with student loans, a not so optimistic outlook on unemployment and hindered central banks as all indicating a recession is on the horizon. Economic data is beginning to mimic data before the previous recession. Retail and wholesale sales have dropped, real U.S. GDP growth is slowing, U.S. exports growth has weakened, and corporate profits are declining, all of which occurred before the recession in 2008. These may indeed be signs that another global recession is imminent.

Historically, the U.S. experiences a recession every five years, our economy is currently in an eight-year recession free streak. China’s economy accounted for 34% of global growth but is may not be growing at all. The Chinese economy has ramifications around the world, but China in isolation would not bring about the next recession in the U.S. The real issue, according to Michael Pento of CNBC, is that incomes and GDP can no longer support equity prices and real estate values. The result is that first-time homebuyers are no longer able to afford to make the down payment, which causes a domino effect preventing existing home owners from moving up. The average market drop, peak to trough of the previous six recessions, has been 37%. With a similar drop, the next recession would take the S&P 500 down to 1,300.

2016-06-15-1466016531-1593432-url.jpg

If a recession is inevitable, then it is important for investors to understand the impact a recession has on precious metals. Historically, during most recessions the spot price of gold is inversely related to the performance of the S&P 500. During the most recent recession, from December 2007-June 2009, the S&P 500 fell approximately 36%. In contrast, the spot price of gold increased 15%.

According to the U.S. Gold Bureau, the market for gold is trending upward in the month of June, going from $1205.90 on May 30th to $1286.00 on June 15th. Contrary to popular belief, gold investors are not necessarily “doomsday preppers,” but regular retail investors who are looking to protect their wealth against another loss.

Love or hate Donald Trump, his potential presidency likely has very little to do with whether or not the U.S. economy falls into another recession. Financial uncertainty in Europe, issues with the Chinese economy, and student loan debt issues are all contributing factors in the less than optimistic economic forecast for the United States. Now may be the right time to take a page from Trump and love gold.

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Re: RECESSION
« Reply #13 on: June 23, 2016, 02:15:11 PM »



Profit Confidential Warns: 3 Key Economic Indicators Suggest U.S. Heading Into a Recession
By Mahendra Published : June 22, 2016
1
 Profit-ConfidentialNew York, NY, June 22, 2016 – Profit Confidential (www.ProfitConfidential.com), an e-letter published by Lombardi Publishing Corporation, a 30-year-old consumer publisher that has served over one million customers in 141 countries, is warning that three key economic indicators suggest the U.S. is heading into a recession.
“After seven years of growth, the U.S. economy appears to be heading toward a recession,” says economist and lead contributor Michael Lombardi. “In fact, three closely followed economic indicators suggest the country may already be in a recession.”

Lombardi explains that the first recession indicator is employment data. For May, the Bureau of Labor Statistics reported that the U.S. economy added just 38,000 jobs—the least amount of jobs created in a month in about six years. The employment figures from March and April were revised lower as well. (Source: “Employment Situation Summary,” U.S. Bureau of Labor Statistics web site, June 3, 2016; http://www.bls.gov/news.release/empsit.nr0.htm.)
“After years of quantitative easing and record-low interest rates, U.S. jobs growth should be robust. But it isn’t, and poor jobs growth is recessionary,” says Lombardi.
According to Lombardi, a second data point that suggests a recession is ahead is the manufacturing figures. Specifically, new orders at U.S. manufacturers; this is because new orders are a clear sign of current demand in the U.S. economy and new orders at manufacturers have been declining since 2014. (Source: “Value of Manufacturers’ New Orders for All Manufacturing Industries,” Federal Reserve Bank of St. Louis web site, June 16, 2016; https://research.stlouisfed.org/fred2/series/AMTMNO.)
“When new orders fall, it means demand in the economy is weakening, which is another recessionary sign,” says Lombardi.
“The last indicator is the Smoothed U.S. Recession Probabilities, which shows the probability of a recession in the U.S. The chart is at its highest level since June 2009, when the Great Recession was nearing its end,” Lombardi concludes. “On top of that, the Dow Jones Industrial Average has gone nowhere over the past 18 months; this seems like a repeat of 2007. The stock market spent 2015 putting in a huge top, and in putting in that top, the stock market, which is a leading economic indicator, is warning us of trouble ahead.”

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Re: RECESSION
« Reply #14 on: June 26, 2016, 02:38:42 PM »



Goldman Sees A UK Recession, Shocked By A Fed "Tightening Cycle Unlike Any In Modern History"

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by Tyler Durden
Jun 25, 2016 6:27 PM
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Starting off the year, Goldman was prodigiously optimistic, bullish... and dead wrong. Since then the bank has cut its rate hike forecast from 4 to 3 to 2 and, now in the aftermath of Brexit, it has just the excuse to say that "our forecasted path for the funds rate now looks quite unlike any tightening cycle in modern Fed history—one increase, followed by an extended pause, followed by gradual but steady increases over the subsequent three years." Which, quite simply, is another way for Goldman to say it was dead wrong. Again.

Here is how Goldman throws in the towel on the whole rate hike thing.

Tweaking Forecasts Following British Referendum
 
The decision of voters in the United Kingdom to exit the European Union will begin a lengthy process of negotiations with uncertain effects for both the UK and the rest of Western Europe. The trade linkages between Britain and the US are relatively modest (exports to the UK amount to about 0.7% of US GDP), so even in the event of a meaningful downturn, these spillovers are unlikely to derail US growth. Financial linkages are much tighter, however, and here we have already witnessed meaningful effects: our Financial Conditions Index (FCI) tightened by about 30 basis points (bp) today—enough to subtract around 0.2pp from GDP growth over the next year, if the FCI changes prove persistent.
 
As a result of the aftershocks of the “leave” vote on US financial conditions, we are downgrading our US growth forecasts for the second half of this year. We now expect GDP growth to average 2.0% in 2H 2016, down from 2.25% previously (see table below). The reduction reflects lower forecasts for business fixed investment spending in the months ahead. At this point we have not changed our forecasts for the unemployment rate or core inflation: we still see the unemployment rate averaging 4.6% in Q4, and core PCE inflation ending the year at +1.7%
 
A lower baseline outline for the economy as well as risk management considerations are likely to keep the Federal Reserve on hold for longer than we previously expected. Before the British referendum, we saw a 25% chance that the FOMC would raise rates at its July meeting, and a 40% chance that it would hike in September. We now see the odds of a hike next month as less than 5%—it would take a sea change in financial conditions and exceptionally strong economic data for the Fed to act so soon—and the probability of a hike in September of just 25%. Beyond September, we would assign about a 5% probability to a hike in November, and 40% to a hike in December. In other words, we still think the FOMC will raise rates this year, but probably not before December. Our modal expectation has therefore shifted from two rate hikes in 2016 to just one.
 
With these revisions, our forecasted path for the funds rate now looks quite unlike any tightening cycle in modern Fed history—one increase, followed by an extended pause, followed by gradual but steady increases over the subsequent three years. Although this pattern would be unusual, we continue to see a series of rate increases as more likely than the path for policy rates implied by market pricing. With the economy close to full employment and inflation firming, there will likely come a point at which the desire to support financial conditions and risk management concerns will no longer hold sway.
 

And in a follow up note released today, Goldman just cut its 2017 UK GDP forecast from 2.0% to 0.2%, as well as predicting a UK recession next year.


The direct effects of reduced access to the Single European Market is the smaller of the two channels. Negotiations on a withdrawal agreement and the separate agreement on the future relationship with the EU are multi-year processes. Some businesses, anticipating those changes, will cancel UK investment. But, in isolation, this does not precipitate a recession. Instead, the larger part of the transmission operates through the effects of uncertainty about what those trading relationships, and the regulatory framework that goes with them, will be. Policy uncertainties are reflected, and perhaps compounded, by changes in the leadership of the UK government and questions about Scottish independence.
 
We have therefore revised real GDP lower in 2016 by 0.5pp to 1.5%yoy and in 2017 by 1.8pp to 0.2%yoy. We expect a recession – albeit mild by historical standards – in the first half of next year. The weaker outlook will also weigh on the inflation outlook. As we had highlighted in our scenario analysis for a Leave decision, the weaker inflation outlook could be offset by the effects of Sterling depreciation and its impact on import prices. Yet, the latter effect is temporary and Sterling's weakening since the Leave decision has not yet been large enough to threaten an overshooting of the inflation target.
Needless to say, a UK recession means rate cuts, more QE by the BOE, and most importantly, it means no more rate hikes by the Fed, most likely every again. We expect over the next few weeks for Goldman to give up on its "one rate hike" call, followed shortly thereafter by the admission that the next Fed move is a rate cut, just as the market now expects... just as we predicted last summer.


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Re: RECESSION
« Reply #15 on: June 28, 2016, 07:26:19 AM »



Wrong Brexit response could cause global recession, says former Wells Fargo CEO
Michelle Fox   | @MFoxCNBC
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There is a risk of a global recession if politicians don't respond appropriately to Brexit, former Wells Fargo CEO **** Kovacevich said Monday.

"If the rhetoric … is one of anger and punishment and retribution, I think people will be so concerned that the actual results will be negative," he said in an interview with CNBC's "Closing Bell."

"It could cause the market to collapse, if you will, or go down much further than they are today."

Stocks around the world have taken a hit after the U.K. on Thursday voted to leave the European Union. The Dow Jones industrial average closed down more than 250 points Monday, its lowest level since mid-March.

Kovacevich believes there is a way to avoid a recession — if politicians act rationally and "kind of calm down."

"This is about a political risk, not an economic risk."

Therefore, political leaders should work together for an orderly exit of the U.K. from the EU, with different trade relationships being negotiated, not zero, he said. The United States also needs to speak out, and should possibly say the U.K. should be invited to NAFTA and included in the Trans-Pacific Partnership.

If it appears everything will be operating on a rational basis, "the market will calm and will simply reflect the fact that the worldwide economy will slow somewhat, but it will not go into a recession," said Kovacevich

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Re: RECESSION
« Reply #16 on: June 28, 2016, 08:13:28 AM »



‘Stagflation,’ ‘hard exit’ and ‘recession’: Here’s what economists are saying about the Brexit fallout

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John Shmuel
Monday, Jun. 27, 2016


FP Watchlist: June 27, 2016

The United Kingdom was hit with a credit downgrade Monday and a rout in global stocks deepened as investors and economists confronted the growing wave of uncertainty unleashed by last week’s Brexit vote.


“I still think there are more losses coming — people are still trying to figure out what this means and I don’t think anyone really knows, because it’s a historic event,” said Sadiq Adatia, chief investment advisor at Sun Life Global Investments.

In New York, the S&P 500 declined 1.8 percent to 2,000.54 , while in Toronto, the S&P/TSX Composite Index lost 1.5 per cent to close at 13,689.79. European stocks were once again hammered, with the Euro Stoxx 600 losing 4.1 per cent following a 7 per cent rout Friday.

The fallout also included Standard & Poor’s announcement that it was taking away Britain’s vaunted AAA rating, downgrading the country to AA and changing the outlook from stable to negative.

Economists Monday predicted the exit will have broad economic impacts, from harming the export-dependent manufacturing heart of Europe to potentially forcing the U.S. Federal Reserve to hold off on any additional interest rate hikes this year.

U.S. Treasuries and the U.S. dollar have soared on the latter, with the 10-year note’s yield falling 12 basis points, or 0.12 percentage point, to 1.44 per cent per cent (yields move inversely to prices).

Britain’s pound sterling again fell against the dollar, hitting US$1.3121 — a level not seen in more than 30 years — as the Yen and gold saw gains.

More economic harm is expected from the Brexit in the coming months. The risk of stagflation in the U.K. has risen, warned Barclays in a note to clients, predicting that the unemployment rate in the country will rise to six per cent (from 5.4 per cent) while the price of goods will go up. Economic growth and domestic demand are expected to remain weak because of all the uncertainty the vote has created.

“This decision to leave the EU … will exacerbate current elevated levels of uncertainty and thus amplify already slowing economic momentum,” said Fabrice Montagne, chief U.K. and senior economist at Barclays.

There are also warnings of a potential “hard exit,” where negotiations between the European Union and Britain break down, hurting both European and global trade. This issue has analysts worried most, as 40 per cent of the U.K.’s trade is with the EU — and an acrimonious split would pummel both economies.

The country’s exit is expected to have a sharp impact on the U.K.’s economy. Bank of America Merrill Lynch is forecasting that Brexit will shave off 2.5 per cent from gross domestic product in the next year, resulting in a three-quarter recession for the country.

“The U.K. vote will likely trigger a recession in the U.K., a slowdown in Europe and a small drop in growth elsewhere,” said economists Ethan Harris and Michael Hanson in a note to clients.

There is also the risk of contagion — the political risk that Britain’s exit will create financial panic in markets that have their own strong independence movements. Europe has seen contagion before — nearly-bankrupt Greece suffers from high borrowing costs because markets fear it is at risk of exiting the eurozone (the European Union’s collection of countries that use its common currency, the euro).

Other countries that have weak economies and large deficits — including Spain, Italy and Portugal — periodically see their bond yields spike whenever Greece faces a situation where it can’t make a bond payments. Ward of HSBC said that “political contagion” will remain an issue in the years after Brexit, as bond yields of countries that show a growing exit movement of their own could rise, creating panic among investors and heightening volatility.

Adatia said that while fears of the Brexit have raised questions about whether the market is seeing another Lehman-type event, he doesn’t think things will go that far. The fund manager said that while he expects more downside in the coming days, eventually, when markets get clarity on how the Brexit will be negotiated, investors will return to buying stocks.

“What is hurting stocks more than anything is lack of information,” said Adatia. “We’re just waiting to hear how all of this will play out. I think we’ll see see nerves settle a bit once that happens.”

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Re: RECESSION
« Reply #17 on: June 28, 2016, 02:17:22 PM »


基金经理预计英脱欧
美经济衰退几率三至五成
127点看 2016年6月28日
(彭博讯)骏利( Janus)全球无限制债券基金的经理葛罗斯表示,在英国上周投票选择脱离欧盟后,美国陷入经济衰退的几率可能高达50%。

葛罗斯在Fox Business Network受访时表示,美国10年期国债收益率可能从周一的1.45%左右跌至1.25%。与日本和德国的负收益率相比,即便美国国债收益率走低,对投资者依然有吸引力。


葛罗斯表示,这样的国债收益率差距可能会推高美元,把美国陷入衰退的几率推高至30%-50%的区间。他说,虽然英国在全球经济中占比不高,但是上周的公投将导致全球的贸易、人口流动和经济增长减速,而这些因素多年来一直是推动经济扩张的力量。

“正如我们所知道的那样,这是全球化的终点,”葛罗斯表示。

投资者潜在避险资产

葛罗斯上周五在彭博电视表示,美国抵押贷款支持证券是投资者潜在的避险资产,这类证券与美国国债的信贷风险类似,但可以提供更高的收益率。

截至上周,他所管理的14亿美元的骏利全球无限制债券基金今年上涨3.1%,强于彭博跟踪的78%的同类基金。

葛罗斯2014年10月份辞任太平洋投资管理公司首席投资官并接手该基金以来,它的回报率为2.1%。


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Re: RECESSION
« Reply #18 on: July 12, 2016, 06:14:42 PM »



IMF Warns Of "Global Contagion" From Italy's Bank Crisis; Forecasts Two-Decade Long Recession

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by Tyler Durden
Jul 11, 2016 8:02 PM
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Piling on to Italy's growing mountain of worries, this evening the IMF itself warned that Europe's third largest economy would grow by less than 1% this year and only marginally faster in 2017, slashing its previous forecasts of 1.1% and 1.25% growth for the next two years, mostly as a result of the most convenient scapegoat available in Europe at the moment: Brexit (which has become to Europe as "cold weather" has been to the US for the past two years).

Christine Lagarde's organization said Italy was “recovering gradually from a deep and protracted recession”, but said the healing process was likely to be “prolonged and subject to risks”. It used its article IV consultation – an annual economic and financial health check – to stress that Italy was vulnerable to a cocktail of threats that could have knock-on effects for the rest of Europe and the world.

The IMF dour outlook may be overly generous. While economists have been racing to downgrade Italy's outlook since the British referendum, Italy's own employers' lobby Confindustria now sees growth of just 0.8% this year dropping further to 0.6% in 2017.  Italy, long one of Europe's most sluggish economies, will struggle to close the gap with its peers even if recent reforms are fully implemented, the IMF report said.

The punchline: only by around 2025 will Italian output return to its 2008 peak before the global financial crisis, according to the IMF. In the same period, growth among Italy's euro zone partners is expected to rise by 20–25% above their pre-crisis levels. In other words, Italy is now in the middle of what will end up being a two-decade recession.

"The authorities thus face a monumental challenge. The recovery needs to be strengthened to reduce high unemployment faster and buffers need to be built, including by repairing strained bank balance sheets and decisively lowering the very high public debt," the report said.


“Downside risks arise from delays in addressing bank asset quality, intensified global financial market volatility – including from Brexit, the global trade slowdown weighing on exports, and the refugee influx and security threats that could further complicate policymaking,” said the IMF. “If downside risks were to materialise, regional and global spillovers could be significant, given Italy’s systemic weight.”

And speaking of Italy's weakest links, the banks, the IMF said that "risks are tilted to the downside," listing a raft of issues including the poor asset quality of Italy's banks, financial market volatility and the impact of a global trade slowdown on exports.


"If downside risks were to materialize, regional and global spillovers could be significant given Italy's systemic weight," it said.

In an assessment that will hardly help Italian bank stocks, the IMF said that the country's banks, which are saddled with some 360 billion euros of bad loans and whose share prices have fallen by more than 50 percent this year, are a particular threat to the economic outlook, the IMF said. "Unless asset quality and profitability problems are addressed in a timely manner, lingering problems of weaker banks can eventually weigh on the rest of the system," it warned.

Finally, in keeping with the tradition of having political involvement, Lagarde sided with the side of Renzi and against Merkel and Dijsselbloem, both of whom have denied Italy's repeated pleas for a bailout, saying that If EU-wide stress tests show that financial stability is at risk, there is scope for Italy to use public money to recapitalize its banks, the head of the IMF's mission to Italy, Rishi Goyal, said in a conference call.

To what extent this could be done without triggering losses to investors under newly adopted "bail-in" rules would depend on negotiations between Italy and the EU, Goyal said.

It was also unclear just who would determine what conditions would define a financial system under stress.

Italy's public debt, the highest in the euro zone after Greece's, will not fall this year as targeted by the government of Prime Minister Matteo Renzi, the IMF said. In a forecast made before the UK referendum, the IMF said Italy's debt would edge up to a new all-time peak of 132.9 percent of gross domestic product from 132.7 percent last year.


Italy’s finance minister, Pier Carlo Padoan, vows there is not banking crisis.

Still, all of this may be moot if various unconfirmed rumors of Italian cashless ATMs end up being true. What is most troubling, however, if past is prologue is the desperate plea by Italy's finance minister, Pier Carlo Padoan, to restore some confidence in Italy's banks, to wit:

PADOAN SAYS THERE'S NO LOOMING BANKING CRISIS IN ITALY
Traditionally, it is such "political" (and futile) statements such as that one - especially when everyone knows they are false - which do precisely the opposite of their intended goal, and emerge just days before the worst case scenario becomes a reality

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Re: RECESSION
« Reply #19 on: August 02, 2016, 07:42:54 AM »



 1 0 0 1
Recession ahead in Britain? Factories slow, business confidence tumbles
Reuters | August 1, 2016
British accountants, meanwhile, said that confidence plunged just after the EU vote, while the Confederation of British Industry said on Sunday that firms expect economic growth to grind almost to a halt over the next three months.
londonLONDON: British manufacturing shrank at its fastest pace in more than three years in July and business confidence tumbled following the Brexit vote, according to surveys that show an increased chance of a recession ahead.
The news will give more impetus for the Bank of England to cut interest rates this week.
Falling output and new orders pushed a closely watched index of factory purchasing managers to its lowest since February 2013, adding to signs that Britain’s decision to leave the European Union is hurting the economy.
Sterling slid to a three-week low against the euro after the manufacturing survey.
British accountants, meanwhile, said that confidence plunged just after the EU vote, while the Confederation of British Industry said on Sunday that firms expect economic growth to grind almost to a halt over the next three months.
This all fuels the case for the BoE’s first rate cut since 2009 but also highlights the challenge it faces as sterling’s slide since the June 23 vote puts upward pressure on inflation.
“The collapse in the total orders balance … signals that support from the weaker pound simply is not powerful enough to offset slumping domestic demand,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said.
“Meanwhile, the pick-up in the prices charged balance to its highest level in almost two years demonstrates that the (BoE) Monetary Policy Committee cannot relax about the inflation outlook when considering policy easing measures this week.”
Inflation remains very low, however.
The Markit/CIPS UK manufacturing purchasing managers’ index(PMI) fell to 48.2 in July from 52.4 in June, below an initial “flash” reading reported in late July of 49.1 and its lowest since February 2013.

Measures of output and new orders also fell below the 50 mark that denotes growth for the first time since early 2013 due to weaker market conditions at home and uncertainty related to the EU referendum.
The output index fell to 47.8 in July from 53.6 in June, its lowest since October 2012, while new orders – which grew robustly in June – suffered their sharpest turnaround since 1998 and fell at their fastest rate in over three years.
Barclays said the purchasing manager survey suggested Britain would enter a recession, contracting by 0.4 percent quarter on quarter at the end of September and by 0.3 percent in the fourth quarter.
That would be followed by “a prolonged and shallow contraction”, it said.
Rate cut coming
Almost all economists polled by Reuters expect the Bank of England to cut interest rates by at least 25 basis points on Thursday, but they were split on whether the Bank would restart its bond-buying program. [BOE/INT]]
Average purchase prices rose at their fastest pace in five years, with companies citing higher commodity prices and higher import prices, the latter due to the weaker currency. Output price inflation was also the highest in nearly two years.
The boost to exports from a weaker pound was less marked than previously estimated, Dobson said. Growth in new export orders slowed in July after hitting a seven-month high in June.
When Britain last suffered a big fall in its currency during the 2008 financial crisis, inflation stayed above the BoE’s 2 percent target for rather longer than expected, while exports failed to gain much.
But inflation in June was far below target at just 0.5 percent, and there has been little sign in recent years that one-off price shocks get baked in to long-run inflation trends.
Since Brexit, there has been no official data shedding real light on the impact of the vote on economic output.
But there are signs consumer confidence is struggling, and Markit said its earlier one-off “flash” PMI surveys were consistent with the economy shrinking by a quarterly 0.4 percent if they persisted.
British finance minister Philip Hammond downplayed the flash PMI numbers saying they were a measure of sentiment and not of “hard activity”

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Re: RECESSION
« Reply #20 on: December 23, 2016, 06:57:03 AM »



 19 1 0 20
No indication of impending recession, say economists
Robin Augustin | December 22, 2016
Malaysia's economic growth has slowed but economists do not foresee contractions in the GDP, contradicting Dr Mahathir’s view that Malaysia is in the process of a recession.
Lee-Heng-Guie_malaysia_6001

PETALING JAYA: There is no concrete evidence pointing to an impending recession as claimed by former prime minister Dr Mahathir Mohamad, says a think tank.
Speaking to FMT, Socio-Economic Research Centre (SERC) executive director Lee Heng Guie said a period of recession was when there was a decline in domestic demand, output and economic activity and a high unemployment rate.
“Our economic growth has slowed in the past two years but it is still positive and not in a recessionary mode.
“The disillusion comes about when the man on the street does not feel the effects of the positive GDP numbers.”
He added that while consumers at large were generally feeling the effects of the rising cost of living, that did not equate to an impending recession.
Independent economist Azrul Azwar Ahmad Tajudin also disagreed with Mahathir’s view that the country was heading towards recession or that it was experiencing the “first stage” of a recession.


“I’ve never heard of there being ‘different stages of recession’ before. It’s important to understand the definition of a recession first.”
Azrul said a recession was defined as a slump in economic activities as reflected by a contraction in GDP for two consecutive quarters.
He said as long as there was no contraction in GDP for two quarters in a row, then there was no recession.
“Although we may be stuck with this ‘new normal’ of sub-par growth for quite a while, for now at least, I don’t foresee any contractions on the horizon.”
Yesterday, in an interview with iMoney.my, Mahathir claimed Malaysia was on the way to a recession.
“Well, the country is going through a process of recession. Recession has many stages but, of course, the first thing you will feel is the cost of goods going up and you are unable to sustain the standard of living that you are used to,” Mahathir was quoted as saying

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Re: RECESSION
« Reply #21 on: July 11, 2017, 11:06:59 AM »





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GOBankingRates > Personal Finance > Economy > Recession > 10 Recession Warning Signs You Need to Know

10 Recession Warning Signs You Need to Know
It might be impossible to predict the next recession. But beware of these warning signs.

By Andrew DePietro July 7, 2017

corlaffra / Shutterstock.com
The U.S. economy has taken some very interesting turns so far in 2017.

At the beginning of June, the Labor Department's monthly jobs report for May came out with disappointing numbers. But instead of a downturn, the Dow Jones, S&P and Nasdaq all set record highs, reported CNBC at the time.

Meanwhile, the American household debt set its own record in the first quarter of 2017, reaching $12.73 trillion and overtaking the previous high set in 2008, according to the Federal Reserve Bank of New York.

With stats like these, it has some people wondering: Are these signs that we're heading toward another recession?

Certain economic behaviors — such as slow job growth and increasing debt levels — can point to the possibility of a looming recession. And sometimes, there are signs that might suggest the country is already in an economic downturn.

Click through to find out what trends you should look for so you can prepare for the next recession.


Antonio Guillem / Shutterstock.com
More People Can’t Pay Their Loans

A rise in loan delinquencies can be linked to excessive credit growth and the build-up of household debt — which are both warning signs of a coming recession, said David Beckworth, a senior research fellow at the Mercatus Center at George Mason University. Although a large build-up of debt can be a warning sign, it's important to remember that delinquencies can also rise as a result of a recession, said Beckworth.

Are We Ready for the Next Recession? Survey Finds Out How Prepared Americans Really Are

Past patterns of delinquency rates and recessions are not encouraging. According to the Federal Reserve Bank of St. Louis data, noticeable increases in commercial and industrial loan delinquency rates occurred during the last three recessions.

These days, many people are falling behind on their auto loans, reports CNBC. And, there has been an increase in subprime lending, which is when lenders issue loans to borrowers who have poor credit. The good news? Overall delinquency rates are low when compared to historical rates, reports CNBC.


Getty Images/Blend Images / JGI
Taxes Bring in Less Revenue

During an economic downturn, states typically see a decline in revenue, according to the Brookings Institute. In fact, during the fourth quarter of 2008 — during the Great Recession — state taxes began to fall, starting with sales taxes.

State sales tax can be especially discerning of consumer confidence. A common reason sales tax revenue can come up short before or during a recession is because Americans aren't buying enough goods and services that the government can tax. And when consumer spending plunges, recessions usually follow.


Getty Images/iStockphoto / cnythzl
Rapid Increases in Fraud Rates

Investor Michael Burry, made famous by "The Big Short" book and movie, noticed significant increases in mortgage fraud as the housing bubble grew toward its peak before collapsing and initiating the Great Recession.

"It is ludicrous to believe that asset bubbles can only be recognized in hindsight," wrote Burry, according to "The Big Short: Inside the Doomsday Machine" by Michael Lewis. "There are specific identifiers that are entirely recognizable during the bubble's inflation. One hallmark of mania is the rapid rise in the incidence and complexity of fraud..."

Increasing rates of fraud, scams and similar misconduct can serve as a warning sign of a recession — and they can even indicate we're already in a recession. In May 2009, before the end of the Great Recession, TIME reported "the number of whistle-blowers reporting fraud, theft or the misuse of company assets" was increasing rapidly.


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Oil Price Shocks

Rising gas prices are always a headache to deal with. But they can often pose much greater dangers than just forcing you to pay more at the gas station.

While We're On the Subject: Surprising Ways You Can Benefit From Low Oil Prices

Rapid increases in oil prices are often due to what is called supply shock — specifically, negative supply shock. In this scenario, the supply of oil suddenly seems to dry up, forcing prices to soar very quickly because the demand for it has not gone down. And when there's an abrupt jump in oil prices, it tends to hurt consumer confidence.

As a result, Americans cut back on spending and this almost always precedes recessions. For example, oil shocks in 1973-74, 1978-79 and 1990 all set the stage for the recessions that soon followed.


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Rising Interest Rates

You might already know how interest rates affect your finances. But you might be wondering how rising interest rates can be a recession warning sign — yet, also indicate growing economy. To understand this concept, you first have to know what the natural interest rate is.

"There is an idea in economics called the 'natural interest rate,'" said Beckworth. "This is the underlying value interest rates would naturally take given the fundamentals of the economy. The Fed's job is to try and align itself with this unobservable rate."

And that's the tricky part that can cause trouble for the economy. "What this means is that for interest rates to be raised too high and cause a recession, they have to be raised above the natural interest rate," he said.


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Decreasing Home Prices and Sales

When home prices and values start falling, many consumers respond by cutting spending because they believe their wealth has decreased. The cutting back can get more extreme if homeowners find themselves in negative equity when they owe more on a home than what it's worth. And, per usual, less consumer spending can lead to a recession.

Don't Make the Same Mistakes: 7 Lessons Homeowners Can Learn From the 2008 Crisis

The Great Recession is probably most identified with crashing home prices and values. Unfortunately for many homeowners, it seems that home values are still struggling to recover. A recent report by real estate website Trulia found that most home values in the U.S. have not recovered to their pre-recession peak.


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Sales of Cardboard Boxes Fall

This might be an unusual warning sign, but it makes a lot of sense.

Many goods are shipped in cardboard boxes and containers. So, if sales of cardboard boxes soar, that means businesses are producing and shipping more products, employing workers and times are good.

But if cardboard box production, sales and prices start falling, it often reflects a decline in spending on consumer goods: the fewer things getting bought, the fewer things getting shipped. Hence, the reason why European cardboard box producer, Smurfit Kappa Group PLC, experienced huge revenue losses from 2007 to 2008, reported CNBC.


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Stock Market Crashes

Stock market crashes are probably the best-known warning signs of a looming recession. A stock market crash can cause a loss of consumer confidence, and thus a decrease in spending. But a loss of consumer confidence can also cause crashes and bear markets.

Stock market crashes and bear markets frequently precede recessions or occur concurrently. Some notable stock market crashes include the 1929 Wall Street Crash before the Great Depression, the 1973-1974 stock market crash and the recession of 1973-1975.


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Unemployment Rates Drop Too Low

It might be indirect, but there's an interesting link between declining unemployment rates and a possible recession.

"There is not a robust relationship here," said Beckworth. "[But] if unemployment drops too low, the Fed gets worried inflation will take off. So, it increases interest rates. If it raises rates too far then yes — it can spark a recession."

The threshold for this to occur is very technical and defined by the Congressional Budget Office. The unemployment rate must fall to three-tenths of a percentage point or more below the non-accelerating inflation rate of unemployment.

Protect Your Money: Learn About the 10 Effects of Inflation


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Slowing or Declining Temporary Job Market

Temporary staffing companies tend to be the first businesses to witness growth after a downturn, reports Fast Company. Thus, when the hiring of temporary employees slows or outright declines, it can be a warning signal of an economic downturn.

You could argue that a decline in temporary jobs could indicate a transition to full-time jobs. But take note that decreases in the employment of temporary workers are usually related to cost-cutting measures.

Up Next: 20 Things to Do in a Falling Stock Market

It's important to note that predicting the next recession is not an exact science. In fact, one can argue that some signs are actually correlations. Still, knowing these potential recession indicators will only help you create a plan that will keep you afloat the next time the country experiences a downturn.

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Re: RECESSION
« Reply #22 on: September 03, 2017, 08:50:20 PM »




A Terrifying Recession Is Coming, Veteran Forecaster Warns
The U.S. economy looks fine right now, but one top * believes a recession is coming.

Scott Gamm  Follow Sep 1, 2017 3:00 PM EDT
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'Weird' Things Are Happening With Gold and It Gets Worse, Expert Sounds the Alarm
A recession might be lurking.

"Soon we will be back in recession -- a recession is coming," Peter Schiff, CEO of Euro Pacific Capital told TheStreet.

One black swan event Schiff sees coming is the notion of investors abandoning the euphoria over Trump's presidency, which helped fuel the stock market rally this year.

"We've had a huge move up since the election of Trump even though prior to the election the expectation was if Trump won it [would be a disaster for markets]," he said.

When asked if the two straight quarters of double-digit earnings growth has sparked the rally in stocks this year, as opposed to solely Trump, Schiff pointed to earnings headwinds in the retail sector.

The S&P 500 is up 10.5% since the start of the year. Schiff thinks the markets could easily correct 20%.

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Re: RECESSION
« Reply #22 on: September 03, 2017, 08:50:20 PM »