LaVorgna Calls BS on Bulls' US Consumer Argument
2016 Recession Despite 'Strong' US Consumer
This morning on Squawk on the Street, Deutsche's LaVorgna explained to CNBC's audience that the bull case for the so-called resilient US consumer fending off the current developing recession is, simply, bull.
We don't need the consumer to be negative for the economy to go into recession, or for that matter for equities to fall thirty percent... What drives business cycles is the investment side: capital spending and inventories.. the 2001 recession consumer spending was positive.. 1990-91 (recession) remained positive... this notion that the consumer has to be negative (for a recession) is a complete falsehood.
If you look at high-yield spreads, they've typically led in each of the last three downturns
If you look at market-price signals, whether it's sensitive materials prices, whether it's high-yield spreads, … or even the slope of the yield curve, every market is basically telling you there is a growth problem.
We have nominal growth that's under 3 percent Q4 over Q4. In that kind of world, you're not going to grow corporate profits very much. People are focused on the labor market, which is a backward-looking indicator, and I'm concerned that we're going to continue to slow.
I'm not saying there is a recession. What I'm worried about is, when you have an economy that is growing as feebly as it is for as long in the business cycle as it's been - and it's only being driven by only one sector, meaning the consumer - we're more prone or apt to get hit by some negative, exogenous shock.
From CNBC Deutsche Bank's David LaVorgna: All markets point to 'growth problem' Video
This morning on Squawk on the Street, Deutsche's LaVorgna explained to CNBC's audience that the bull case for the so-called resilient US consumer fending off the current developing recession is, simply, bull.
We don't need the consumer to be negative for the economy to go into recession, or for that matter for equities to fall thirty percent... What drives business cycles is the investment side: capital spending and inventories.. the 2001 recession consumer spending was positive.. 1990-91 (recession) remained positive... this notion that the consumer has to be negative (for a recession) is a complete falsehood.
If you look at high-yield spreads, they've typically led in each of the last three downturns
If you look at market-price signals, whether it's sensitive materials prices, whether it's high-yield spreads, … or even the slope of the yield curve, every market is basically telling you there is a growth problem.
We have nominal growth that's under 3 percent Q4 over Q4. In that kind of world, you're not going to grow corporate profits very much. People are focused on the labor market, which is a backward-looking indicator, and I'm concerned that we're going to continue to slow.
I'm not saying there is a recession. What I'm worried about is, when you have an economy that is growing as feebly as it is for as long in the business cycle as it's been - and it's only being driven by only one sector, meaning the consumer - we're more prone or apt to get hit by some negative, exogenous shock.
From CNBC Deutsche Bank's David LaVorgna: All markets point to 'growth problem' Video