New York, NY, July 15, 2016 – Profit Confidential (www.ProfitConfidential.com) an e-letter of Lombardi Publishing Corporation, a 30-year-old consumer publisher that has served over one million customers in 141 countries, is announcing that three key economic indicators suggest a U.S. recession is almost certain.
“The S&P 500 and Dow Jones Industrial Average both recently hit record intraday highs, while the NASDAQ has wiped out its loses for the year,” says economist and lead contributor Michael Lombardi. “So the idea of a U.S. recession in 2016 may sound absurd, but that’s exactly what the economic data suggests.”
Lombardi explains that the general business conditions in areas covered by the Federal Reserve Bank of New York and the Federal Reserve Bank of Philadelphia suggest the U.S. is heading toward a recession in 2016. A reading below zero suggest the indicator has decreased over the prior month. The last time these two indices dropped so far below zero, the U.S. entered a recession. (Source: “Current General Activity, Diffusion Index for FRB – Philadelphia District,” Federal Reserve Bank of St. Louis web site; https://fred.stlouisfed.org/series/GACDFSA066MSFRBPHI#0, last accessed July 12, 2016.)
Another factor suggesting a recession is possible for the U.S. is consumer spending. Roughly 70% of U.S. gross domestic product (GDP) is composed of consumer spending. If consumers tighten their wallets, the U.S. economy suffers, and since July 2014, the rate of consumer expenditures has continued to decline and is a worrying trend. (Source: “Personal Consumption Expenditures,” Federal Reserve Bank of St. Louis web site; https://fred.stlouisfed.org/series/PCE#0, last accessed July 12, 2016.)
“Finally, capacity utilization of U.S. companies has been collapsing too. This indicator shows at what level of activity companies are operating. Right now, the year-over-year change in monthly capacity utilization figures in the U.S. have been in a serious downtrend since July 2014,” Lombardi adds.
“What this indicates is that U.S. factories are getting further and further away from working at full potential, and at the very core, it suggests demand is in a slump. If the capacity utilization of companies continues to decline, at what point do they start laying off staff?” (Source: “Capacity Utilization: Total Industry,” Federal Reserve Bank of St. Louis web site; https://fred.stlouisfed.org/series/TCU#0, last accessed July 12, 2016)
“Aside from the major tech companies that are actually growing and gold stocks, the general market is having trouble making money and looks like it put in a huge top in 2015,” Lombardi concludes. “2016 is the year the stock market starts reversing. Investors need to exercise caution as the dead cat bounce in stocks that started in the spring of 2008 comes to an end.”
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Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.LombardiPublishing.com.