New York, NY, May 18, 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 four leading economic indicators suggest the U.S. economy is in a recession.
“On April 28, it was revealed that the U.S. economy advanced just half a percent in the first quarter of this year, marking the worst performance in two years,” says economist and lead contributor Michael Lombardi. “But that wasn’t really a surprise, as many economic indicators have already confirmed that the U.S. is in a recession.” (Source: “National Income and Product Accounts Gross Domestic Product: First Quarter 2016 (Advance Estimate),” U.S. Bureau of Economic Analysis web site, April 28, 2016; http://www.bea.gov/newsreleases/national/gdp/2016/gdp1q16_adv.htm.)
Lombardi explains that the investors-to-sales ratio, which measures the buildup of inventory at businesses in the U.S. compared to sales, is climbing steadily higher. In times of recession, this is exactly what the ratio does, as business inventories build and sales plunge. As it stands, the inventories-to-sales ratio is pretty much saying the U.S. is in a recession.
Another indicator that suggests the U.S. economy is in a recession is the value of new orders at consumer goods manufacturers. The amount of new orders for durable goods received by manufacturers in the U.S. has been seeing month-over-month declines since February of 2015; that’s 13 months in a row. This is an important indicator because the U.S. economy is a consumer-based economy. If consumers spend more, the economy improves, but if manufacturers are getting fewer orders, it suggests consumer spending is weak.
Thirdly, consumer sentiment is plunging. According to the University of Michigan, consumer sentiment has been in a decline since the beginning of 2015, falling more than 10%. Historically, whenever consumer sentiment has plunged, a recession usually follows. (Source: “Preliminary Results for May 2016,” University of Michigan Surveys of Consumers web site; http://www.sca.isr.umich.edu/, last accessed May 12, 2016.)
“The outlook for the U.S. economy does not look good. In the first quarter of 2016, the estimated earnings declines for S&P 500 companies was now negative 7.1%. This marks the first time the S&P 500 has seen four consecutive quarters of year-over-year declines in earnings since 2008,” Lombardi concludes. “When companies are piling up inventories because of weak sales, when new orders for goods at manufacturers are plummeting, when consumer sentiment is falling, and when the S&P 500 companies are experiencing declining earnings for four quarters in a row, the U.S. is in a recession.” (Source: “Earnings Insight,” FactSet.com, May 6, 2016; http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_5.6.16.)
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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.