The oft forecasted Recession hasn’t yet appeared. Has it been avoided (i.e., “soft-landing”)? A look at the growing evidence leads us to conclude that the Recession is coming; we suspect that when the NBER gets around to dating it, this quarter (Q4) will mark its beginning.
The first evidence of this showed up in the recent employment data. And consumers (2/3rds of GDP) are just starting to adjust after a spending spree with the “free money” doled out by Uncle Sam in 2021 and 2022. Credit card balances are now at record levels (and at interest rates in the mid-20% range). Delinquencies are now rising. Earnings expectations for the Retail industry are being cut as major retailers reduce guidance. And stock analysts have been cutting their earnings forecasts (see chart). Banks have cut back on staff and have restricted lending both to consumers and businesses while upping their loan loss reserves. Housing affordability is at a 35-year low because of high prices, but equally to blame are mortgage rates, now at 8%. As for inflation, that’s about the only good news; it looks like it is melting.
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