Rosenberg: Recession 2012
Extraordinary Recession 2012 Risk
Recession 2012? David Rosenberg Keeps Count: 7
While most still hold that the risk of a new US recession in 2012 is far less than the risk of recession was in 2011, increasingly the facts simply do not support such a view.
In light of the most recent data, Gluskin-Sheff chief economist David Rosenberg finds no fewer than seven very compelling reasons why the US may not be so lucky with recession 2012 as it was last year.
FinancialPost.com
Seven ‘extremely rare’ signs that recession risks in America are rising: David Rosenberg
1) The Philly Fed index of factory activity is in the red for the third straight month. Seven out of eight times when the average reading has been that low (-11.8) for that long the U.S. economy has tipped into recession.
2) Retail sales are also down three months in a row (April-June) . Going back in the history books that long a run of declining sales is a one-in-50 chance and each time it has happened, except once, the economy was in recession. The only time it wasn’t was between October to December, 2000, amid the tech bubble wreckage - and the recession began the next quarter.
3) Jobs: A non-farm payrolls reading south of 100,000 for July would make four in a row. In the past 50 years, only once (last summer’s soft patch) did such a decline in the job market fail to push the economy into recession.
4) Disinflation: Inflation is trending down and the flat to negative readings in the past three months has led to a mild deflationary environment where the CPI has declined at a 0.8% annual rate.
“How common is that? Not very. It last happened at the depths of the Great Recession in early 2009 and looking all the way back to 1950, is a one-in-20 event”
5) Exports: The ISM manufacturing export orders index in June sagged to its lowest level since July 2009, with service sector exports at their lowest level since July last year. Not a good sign considering exports have driven 40% of pickup in real economic activity since the recession ended three years ago.
6) A 40% surge in grain costs in just over a month is going to hit Americans’ household budgets hard. Every recession going back to 1970 was preceded by a squeeze from soaring food prices.
7) Fiscal Cliff: When your economy is running at barely more than 1%, a 4 to 5% drop off the fiscal cliff is not pretty. “Go back to the last two times we saw anything close to a fiscal withdrawal as intense as what seems in store for 2013 - we are talking about 1960 and 1969 - and recessions did ensue.”
And on top of all of that, I think the following other factors should also be noted:
(8) Europe is squarely back in recession, and it's getting deeper.
(9) UK is in its longest double-dip recession of the post WWII era.
(10) China is experiencing a hard landing/growth recession.
(11) Austerity continues to be all the rage around the world.
Recession 2012? David Rosenberg Keeps Count: 7
While most still hold that the risk of a new US recession in 2012 is far less than the risk of recession was in 2011, increasingly the facts simply do not support such a view.
In light of the most recent data, Gluskin-Sheff chief economist David Rosenberg finds no fewer than seven very compelling reasons why the US may not be so lucky with recession 2012 as it was last year.
FinancialPost.com
Seven ‘extremely rare’ signs that recession risks in America are rising: David Rosenberg
1) The Philly Fed index of factory activity is in the red for the third straight month. Seven out of eight times when the average reading has been that low (-11.8) for that long the U.S. economy has tipped into recession.
2) Retail sales are also down three months in a row (April-June) . Going back in the history books that long a run of declining sales is a one-in-50 chance and each time it has happened, except once, the economy was in recession. The only time it wasn’t was between October to December, 2000, amid the tech bubble wreckage - and the recession began the next quarter.
3) Jobs: A non-farm payrolls reading south of 100,000 for July would make four in a row. In the past 50 years, only once (last summer’s soft patch) did such a decline in the job market fail to push the economy into recession.
4) Disinflation: Inflation is trending down and the flat to negative readings in the past three months has led to a mild deflationary environment where the CPI has declined at a 0.8% annual rate.
“How common is that? Not very. It last happened at the depths of the Great Recession in early 2009 and looking all the way back to 1950, is a one-in-20 event”
5) Exports: The ISM manufacturing export orders index in June sagged to its lowest level since July 2009, with service sector exports at their lowest level since July last year. Not a good sign considering exports have driven 40% of pickup in real economic activity since the recession ended three years ago.
6) A 40% surge in grain costs in just over a month is going to hit Americans’ household budgets hard. Every recession going back to 1970 was preceded by a squeeze from soaring food prices.
7) Fiscal Cliff: When your economy is running at barely more than 1%, a 4 to 5% drop off the fiscal cliff is not pretty. “Go back to the last two times we saw anything close to a fiscal withdrawal as intense as what seems in store for 2013 - we are talking about 1960 and 1969 - and recessions did ensue.”
And on top of all of that, I think the following other factors should also be noted:
(8) Europe is squarely back in recession, and it's getting deeper.
(9) UK is in its longest double-dip recession of the post WWII era.
(10) China is experiencing a hard landing/growth recession.
(11) Austerity continues to be all the rage around the world.