Are We Going Into Recession?
Are We Going Into Recession?
Is the US in Recession? New Global Recession?
These are the questions that are on everyone's minds, and often the tips of their tongues, whether spoken, or not. It's 2016, and indeed, recession thoughts - and some increasingly nervous talk - are happening not just in the usual suspects (Japan, Argentina, etc.), but just about all over the world .. in fact, "Are we in recession" and "Are we going into a recession" and increasingly "Recession 2016", and even something like "Recession through 2021", are understandably highly searched topics quite literally on the world wide web.
Is This a Recession
Data from around the world strongly point to global GDP now falling to at or below 2.5% annually per-capita, a rate that historically has always been associated with global recession. Economic forecasters, who are notoriously often behind the curve when it comes to economic sea changes, are now rushing to further downgrade their global growth forecasts for 2016: Citi's now calling for 2.5% or less YoY global GDP Feb 25 2016: Citi Sees Global Recession, Dovish Fed, IMF set to downgrade again: Feb 24 2016: IMF says it may further cut global growth forecast, Feb 18 2016: OECD Cuts Global Growth Forecast and Warns of Growing Risks, and Jan 6: World Bank Again Cuts Global Growth Forecasts, with the World Bank implicitly conceding in their latest forecast for 2016 global GDP that in 2015 the world was already right on the cusp of a global recession.
In the US Recession 2016 May Already be Here
First, I really do not know why so many are surprised by this. We've had a pretty good run, considering that just a few years ago we were quite literally facing down a second Great Depression - which many, including myself, now refer to as satisfactorily meeting any reasonable definition of economic depression, or at the very least, Depression Lite. And after six years of technical economic recovery in the US, however feeble and wanting, that's typically a pretty long time to go without a new recession.
Want more proof that the US is on the verge of, if not now already in, a US recession?
Indicators That The US may Already be in Recession
Just Today's Headlines List:
Service Sector Decline May Be Signalling US Recession Underway
Let's look a little closer at Markit's Services Flash PMI. Graph provided by Markit.
Above: Markit's Flash Feb 2016 PMI Highlights Risk of Imminent 2016 US Recession
Here's what Markit had to day about their February Flash Services PMI
It’s clear that business confidence in the service sector has faltered significantly, reaching the lowest level in five-and-a-half years in February.
Optimism about the outlook has been on a downward trend over the past two years, with worries about the global economic outlook, financial market volatility, the presidential election and interest rate policy all taking a further toll on business morale in February. Full story: here.
Of all of our recent US Recession 2016 Coincident Indicators, Markit's Flash Service's fall into contraction ranks among the most cautionary.
Remember Subprime? Recession 2007-2009?
And then there's also this. We learned on Monday that more US subrpime borrowers are delinquent and at risk of going into default on their auto loans. In fact, in January it hit a level last seen in 2010, when the US was struggling to break free of the clutches of the Global Financial Crisis and Great Recession.
In addition to the new cycle high in subprime auto loan delinquencies, even more concerning may be that the default rate also hit a new cycle high, at 12.3%, up from December's 11.3%, for a full 100bps increase in a single month!
Is the US in Recession? New Global Recession?
These are the questions that are on everyone's minds, and often the tips of their tongues, whether spoken, or not. It's 2016, and indeed, recession thoughts - and some increasingly nervous talk - are happening not just in the usual suspects (Japan, Argentina, etc.), but just about all over the world .. in fact, "Are we in recession" and "Are we going into a recession" and increasingly "Recession 2016", and even something like "Recession through 2021", are understandably highly searched topics quite literally on the world wide web.
Is This a Recession
Data from around the world strongly point to global GDP now falling to at or below 2.5% annually per-capita, a rate that historically has always been associated with global recession. Economic forecasters, who are notoriously often behind the curve when it comes to economic sea changes, are now rushing to further downgrade their global growth forecasts for 2016: Citi's now calling for 2.5% or less YoY global GDP Feb 25 2016: Citi Sees Global Recession, Dovish Fed, IMF set to downgrade again: Feb 24 2016: IMF says it may further cut global growth forecast, Feb 18 2016: OECD Cuts Global Growth Forecast and Warns of Growing Risks, and Jan 6: World Bank Again Cuts Global Growth Forecasts, with the World Bank implicitly conceding in their latest forecast for 2016 global GDP that in 2015 the world was already right on the cusp of a global recession.
In the US Recession 2016 May Already be Here
First, I really do not know why so many are surprised by this. We've had a pretty good run, considering that just a few years ago we were quite literally facing down a second Great Depression - which many, including myself, now refer to as satisfactorily meeting any reasonable definition of economic depression, or at the very least, Depression Lite. And after six years of technical economic recovery in the US, however feeble and wanting, that's typically a pretty long time to go without a new recession.
Want more proof that the US is on the verge of, if not now already in, a US recession?
Indicators That The US may Already be in Recession
Just Today's Headlines List:
- This morning Morgan Stanley put out an alert advising its clients on FORD & GENERAL MOTORS! GM, Ford Fall as Morgan Stanley Analyst Cites Recession Risk.
- In January US Sales of New Homes Fell 9.2% overall - and plunged in the very important West! US new home sales tumbled 9.2 percent in January as purchases plunged in the West
- SERVICE SECTOR IS NOW CONTRACTING in the US! This last bullet point can not be overstated. While manufacturing has been in recession for a year now, recession naysayers have continuously pointed to the service-side of the economy (which in the US is a much larger share of economic growth than manufacturing) as their proof that the economy at large is and will be holding its own, and that despite a pronounced, pervasive and persistent decline in manufacturing, the rest of the economy was above all that. This time, they have been saying, is different!
Service Sector Decline May Be Signalling US Recession Underway
Let's look a little closer at Markit's Services Flash PMI. Graph provided by Markit.
Above: Markit's Flash Feb 2016 PMI Highlights Risk of Imminent 2016 US Recession
Here's what Markit had to day about their February Flash Services PMI
It’s clear that business confidence in the service sector has faltered significantly, reaching the lowest level in five-and-a-half years in February.
Optimism about the outlook has been on a downward trend over the past two years, with worries about the global economic outlook, financial market volatility, the presidential election and interest rate policy all taking a further toll on business morale in February. Full story: here.
Of all of our recent US Recession 2016 Coincident Indicators, Markit's Flash Service's fall into contraction ranks among the most cautionary.
Remember Subprime? Recession 2007-2009?
And then there's also this. We learned on Monday that more US subrpime borrowers are delinquent and at risk of going into default on their auto loans. In fact, in January it hit a level last seen in 2010, when the US was struggling to break free of the clutches of the Global Financial Crisis and Great Recession.
In addition to the new cycle high in subprime auto loan delinquencies, even more concerning may be that the default rate also hit a new cycle high, at 12.3%, up from December's 11.3%, for a full 100bps increase in a single month!