The U.S. economy is struggling and a recession is the most likely scenario for 2017. I say this based on three different, historically accurate economic indicators.
First, let’s look at what is happening at wholesalers in the U.S. economy. We find their sales are declining and their inventories continue to pile higher.
The chart below plots the wholesale inventories/sales multiple. This is an indicator of how many months its takes to clear out inventories at wholesalers given the current sales. Note that the gray-shaded area indicates recession in the U.S. economy.
The inventories/sales multiple at wholesalers continues to increase. Last time this ratio was this high, the U.S. economy was witnessing a recession. At the very core, this begs me to ask, is the U.S. economy is already in a recession?
(Source: Federal Reserve Bank of St. Louis, last accessed September 13, 2016.)
Secondly, consumer confidence in the U.S. economy is in trouble.
Consumer spending is hands down one of the biggest factors that drives the U.S. economy. And it is consumer confidence that drives consumer spending. If Americans are feeling scared about their personal financial conditions, they just don’t shop.
With this in mind, look at the chart below of University of Michigan Consumer Sentiment–one of the leading indicators of consumer confidence in the U.S. economy.
Chart Courtesy of Stockcharts.com
Since the beginning of 2015, consumer confidence in the U.S. economy has been deteriorating. This will of course impact consumer spending.
Finally, the standard of living for the average American isn’t improving.
There are many examples of average Americans struggling, but one that continues to make me question the economic growth preached by the mainstream is the number of Americans living in poverty. According to PovertyUSA, 46.2 million Americans, or one in six Americans, are living in poverty in the U.S. economy. (Source: PovertyUSA, last accessed September 13, 2016.) The amount of poor people in this country is equal to the population of Spain!
U.S. Economic Outlook For 2017
The mainstream will have you convinced the economy is improving. After all, the stock market is close to its all-time high and that is giving us the illusion that everything is fine.
Don’t fall for it. A recession becoming a reality as early as 2017 could become a reality as data coming out of the U.S. economy worsens.