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Evidence The US Economy Could Be Plunging Into A Very Deep Recession Is Rapidly Mounting
ZeroHedge.com Tue, 06/18/2019 - 16:25 Authored by Michael Snyder via The Economic Collapse blog, Not since 2008 have we seen so much bad economic data come rolling in all at the same time. Even without a war with Iran, which by the way is looking increasingly likely with each passing day, it definitely appears that the U.S. economy is steamrolling toward recession territory. The employment numbers for last month were abysmal, global trade has collapsed to the lowest level that we have seen since the last recession, and manufacturing numbers just keep getting worse and worse. In fact, the New York Fed’s Empire State manufacturing index just suffered the worst one month decline in history… The New York Fed’s Empire State business conditions index took a sharp turn for the worse in June, falling into negative territory for the first time in more than two years. The Empire State manufacturing index plummeted 26.4 points to negative 8.6 in June, the New York Fed said Monday. That’s a record decline. Economists had expected a reading of positive 10, according to a survey by Econoday. Not even during the last recession did we witness a plunge of that magnitude. And other measures of U.S. manufacturing activity are also “sinking steadily”… And it’s not the only indicator showing a turn for the worse: Others, including the Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey, have also been sinking steadily. When you step back and look at the big picture, it becomes quite clear what is happening. At this point, it is simply not possible for anyone to credibly claim that the U.S. economy is still in good shape. All of the numbers are pointing in the same direction, and Morgan Stanley’s chief US equity strategist Michael Wilson made this point exceedingly well on Monday… Decelerations and disappointments are mounting:
This index has a tight relationship with ISM new orders and analyst earnings revisions breadth. Our analysis shows downside risk to ISM new orders (25% y/y), S&P earnings revisions breadth (6-13%) and the S&P 500 y/y (8%) if historical links hold. For much more on the collapse of the MSBCI, please see my previous article entitled “Morgan Stanley’s Business Conditions Index Just Suffered The Biggest One Month Decline In History”. Many analysts are pointing out that our economic problems really seemed to start accelerating once trade negotiations with China completely broke down, and this is true. If the U.S. and China could find a way to reach a trade agreement, that would be a tremendous short-term boost to the economy at a time when we desperately need it. But that isn’t going to happen unless President Trump completely caves in. Because at this point the Chinese are extremely angry, and they are definitely in no mood to compromise. In fact, one Chinese editorial that was recently published boldly declared that they are ready “to fight it out till the end”… “China will not be afraid of any threats or pressure the United States is making that may escalate economic and trade frictions. China has no choice, nor escape route, and will just have to fight it out till the end,” the Qiushi commentary said. “No one, no force should underestimate and belittle the steel will of the Chinese people and its strength and tenacity to fight a war.” When Americans are deeply suffering during the next recession, will they be willing to “fight it out till the end” like the Chinese are? And if a trade war with China wasn’t enough, now we also have a trade war with India to deal with. In fact, India just hit U.S. exports with a wave of very large tariffs… India just increased tariffs on US exports, dealing another blow to fragile global trade. The tariffs on several US products will go into effect on June 16, India’s Finance Ministry said in a statement Saturday. The goods targeted include American apples — which will be hit with a 70% tariff — as well as almonds, lentils and several chemical products. Of course these tariffs were in retaliation for the tariffs that we hit India with after Trump kicked them out of a preferential trade program… The two countries exchange goods and services worth about $142 billion a year, but the relationship has soured in recent weeks after the Trump administration ended India’s participation in a preferential trade program earlier this month. The program exempted Indian goods worth more than $6 billion from US import duties in 2018. We were certainly heading for a recession even without these trade conflicts, but without a doubt they have made things substantially worse. And now is definitely not a good time for a recession, because much of the country is completely and utterly unprepared for any sort of an economic downturn. The following comes from an opinion piece authored by William Spriggs… One oft-cited statistic points to just how unstable the finances of most Americans are: nearly 40 percent of households could not withstand an unexpected expenditure of $400 — the cost of just one medical bill or car repair. The most unnerving point to keep in mind is that we are even less prepared for a sudden slowing of the economy than we were before the Great Recession of 2008. During the relatively stable economic times of the past few years, Americans should have been preparing instead of partying. But instead, most Americans bought into the myth that our massively bloated debt-fueled standard of living could be perpetuated indefinitely. So now a crisis is coming which many believe is going to be even worse than what we experienced in 2008, and most of us are going to be completely blindsided by it. 69% Of US CFOs Believe That A Recession Will Start "By The End Of 2020"
Thu, 06/13/2019 - 15:05 Authored by Michael Snyder via The End of The American Dream blog, Throughout 2017 and most of 2018, U.S. corporate executives were generally very optimistic about the future of the economy, but now that optimism has been replaced by a deep sense of doom and gloom. And of course there are very good reasons for all of the doom and gloom. The trade war with China looks like it is going to last for an extended period of time, recent global manufacturing numbers have been absolutely dismal, and it is being projected that corporate earnings will be down significantly in the second quarter. The economic environment is tough and it is rapidly getting tougher, and a brand new survey that was just released has found that 69 percent of U.S. CFOs believe that a new recession will start “by the end of 2020″… The longest economic expansion in modern American history could come to a screeching halt right before the 2020 presidential election. At least that’s what US finance leaders fear. Nearly half (48.1%) of chief financial officers in the United States are predicting the American economy will be in recession by the middle of next year, according to the Duke University/CFO Global Business Outlook survey released on Wednesday. And 69% of those executives are bracing for a recession by the end of 2020. Other surveys have come up with similar results. For example, a recent National Association for Business Economics survey concluded that there is “a 60% chance” that a recession will start by the time next year ends… There is about a 60% chance of a recession starting in the United States by the end of next year, according to a National Association for Business Economics survey published earlier this month. Most economists in that report cited protectionist trade policy as the leading risk to the US economy. Even before trade negotiations with China completely broke down U.S. economic numbers were looking quite bleak, but now it has become clear that the trade war is going to accelerate our economic problems. In fact, it is being reported that large U.S. corporations that get over half of their sales internationally “are expected to see a 9.3% slump in second-quarter earnings”… The trade war and global slowdown are combining to trigger a sharp drawdown in profits for U.S. multinational companies. Companies that derive more than half their sales outside the U.S. are expected to see a 9.3% slump in second-quarter earnings as the reporting season looms about a month away, according to FactSet estimates that see the S&P 500 broadly reporting a 2.3% decline. The one thing that could really help our economic situation right now would be a trade agreement with China that would end this trade war. And it would seem that both sides should have a strong incentive to make a deal, because both sides have so much to lose. But at this point it appears that any hopes of a deal in the short-term are completely dead. President Trump has made it abundantly clear that he will not accept anything dramatically different from the deal that he thought he almost had when talks broke down, and the Chinese have made it abundantly clear that such a deal is completely and totally unacceptable. So many U.S. companies are now operating under the assumption that this trade war will be here for the long haul. For example, the following comes from an opinion piece that Canary CEO Dan K. Eberhart recently authored for CNN… At Canary, we plan to operate as if the tariffs on Chinese goods are here to stay. China’s government recently released a white paper on the trade standoff that makes it clear Beijing is not giving in to US demands anytime soon. We have moved much of our manufacturing to Vietnam, India, Malaysia and South Korea. We still depend on China for a significant portion of the wellheads and other steel products used in the oilfields, but it’s on the decline. Our goal is for non-Chinese sources to account for 25% of our international purchases within the year, up from our previous target of 10%. And the Chinese appear to be preparing as if this struggle could potentially last for quite a few years. The following is a short excerpt from a recent Bloomberg article entitled “Tour of China Shows a Nation Girding for Protracted Trade War”… Now, Trump says, it’s China’s turn to cower. Yet to visit China these days is to encounter the limits of his punch-them-in-the-nose strategy. Even as Trump threatens to raise import duties to painful levels, 10 days of meetings with Chinese officials, academics, entrepreneurs and venture capitalists revealed a nation rewriting its relationship with the U.S. and preparing to ride out a trade war. Trump is seeking to increase pressure on Xi Jinping, his Chinese counterpart, before this month’s G-20 summit, but Trump may already have pushed too far. Last month, Xi exhorted his countrymen to a second Long March, an echo of Mao’s seminal strategy to preserve the communist revolution. Without a doubt, we needed to get tough with China, because they have been lying, cheating, manipulating their currency and stealing our intellectual property for many years. So doing nothing was not an option. But let there be no doubt that this trade war is going to be exceedingly painful, and the longer it lasts the more painful it is going to become. Are Americans ready to make the sacrifices necessary in order to win a protracted trade dispute? That is a a very good question, and only the passage of time will reveal the true answer. |
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