US Economy Continues to Weaken As Warning Signs Flash Recession Ahead
CrushTheMarket.Com, Nov 2, 2016
The US economy continues to show weakening conditions as new warning signs are flashing recession ahead. This is despite the best efforts of the FED and the US Government to ensure there is plenty of measures in place to continue to stimulate the economy.
I know what your thinking: we had a first look at US Q3 GDP and the result was positive and even beat expectations. GDP came in at 2.9%. However I find the result convenient and timely considering there is an election soon. The second and third estimate for GDP could see considerable revisions lower after the election has ended.
The other interesting points about the GDP result was that a 1/3 of the GDP growth came from a one off exporting boost of Soybeans. This is not a normal occurrence for the US however. The one off export surge contributed 0.61% of the GDP growth.
Another big factor for the surge in GDP was a large inventory buildup in the quarter contributing 1.17% of the GDP growth. The most likely reason for the surge in inventories is in anticipation of a big pickup in spending for Christmas. However, the US consumer is struggling to meet their living costs, as the consumer is no longer confident and struggling with price rises for everyday items.
In addition the majority of the job gains over the last 12 months have been in part time jobs and low paying services jobs. Therefore companies are going to find it difficult to clear all the inventory ordered in the Q3 for the coming quarter. This will lead itself to lower GDP result the following quarter as companies struggle to clear excess inventory over the holiday period.
Lastly GDP is measured after deducting inflation for the quarter. The Government is indicating that inflation has slowed considerably from the previous quarter. For everyday citizens in the US they know this doesn’t make much sense as rent, food, fuel, electricity, healthcare and education continues to jump higher making it harder for average American’s to pay for everyday items. If the GDP price index remained the same as the previous quarter at 2.3% the GDP would of been further reduced to reflect a more accurate measure of US economy.
Presently the US has had 5 consecutive quarters of corporate profits falling. The current quarter profit season is still in progress with high odds that we will make 6 consecutive quarters of declining profits. If this occurs this will the most quarters of profits declining without a recession officially occurring.
Capital goods spending has basically been declining nearly every quarter since 2014. If the economy was strong companies would be investing in more capital goods to grow production and revenue. This would be from an increase in demand for the goods and services they provide. However the opposite is present as demand continues to fall leading to companies cutting back expenditure to counter weak demand.
With rates so low in the US at 0.25% it’s not a good indication that business conditions are declining.
Consumer confidence continues to fall with the latest results showing confidence dropping again to levels last seen in 2014.
In the current business cycle delinquency rates / bad debts have spiked from below 1% to the current level of 1.6%. Keep in mind interest rates are currently at 0.25% having been at zero for about 6 years. Therefore rates are extremely low compared to previous business cycles yet companies are having trouble paying their loans.
The other troubling fact for the banks is that debt level for companies are much higher than the last recession. This is due to record low rates enticing companies to borrow to start or increase stock buybacks and increase dividends. So any fallout from an accelerated delinquencies within corporate lending, will have a much deeper negative impact to bank’s solvency than the 2008 recession.
Правительство США жестоко нарушило мои права человека при проведении кампании террора, которая заставила меня покинуть свою родину и получить политическое убежище в СССР. См. книгу «Безмолвный террор — История политических гонений на семью в США» — «Silent Terror: One family’s history of political persecution in the United States» — http://arnoldlockshin.wordpress.com
Правительство США еще нарушает мои права, в течении более 12 лет отказывается от выплаты причитающейся мне пенсии по старости. Властители США воруют пенсию!! Всё это — ещё доказательство, что настоящий действующий закон в США — Закон джунглей.
ФСБ — Федеральная служба «безопасности» России — вслед за позорным, предавшим страну предшественником КГБ, выполняет приказы секретного, кровавого хозяина (boss) — американского ЦРУ (CIA). Среди таких «задач» — мне запретить выступать в СМИ и не пропускать большинства отправленных мне комментариев. А это далеко не всё…
Арнольд Локшин, политэмигрант из США