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Please read this after viewing my post here USA Recession Technicaly Confirmed
The chart attached shows that when the number of months to sell a house exceeds 8 months (B on chart), while the consumer misery index is above 10 (C on chart) the Consumer GDP has always sunk to ZERO or less (A on Chart). The rugged and tough USA consumer has just completed 17 years (ie 1991 to 2008) of positive GDP consumption and now it is beat.
The Number of months to sell house is the efftect of banks changing the rules, consumer under stress and of course wanting a price thats not current market price.
My conclusion: That a USA Consumer led recession is a slam dunk. Consider this view with the unemployment rate of change chart sent previously and I feel odds are 100%. My guess 2008 Q3 will see it start.
This view has just been reinforced by Northern Trust comments today (29/08/2008 Asha Bangalore) on the latest USA Consumer spending statistics ..” inflation adjusted consumer spending fell 0.4% in July”..
,,” Consumer spending will have to advance in leaps and bounds in August and September for a flat reading in the third quarter. In other words, a decline in third quarter consumer spending is nearly certain. Assuming our forecast is accurate, this would be the first quarterly decline in consumer spending since fourth quarter of 1991. If consumer spending posts a decline, it should not be surprising to see a minus sign attached to change in GDP during the third quarter.”…
And I believe, negative GDP in 2008 Q4 and 2009 Q1.
Note: 1991 was the last Consumer led recession.
Definitions:
1) Months to sell a house is from the US Census Bureau
2) The misery index is the headline inflation rate plus unemployment rate plus (inverse) change in house prices (house price measure is from the US Census Bureau (not Case Shiller or OFEO, so its very conservative).
3) Consumer GDP last data point is 2008 Q2, unrevised.
Chart data from : www.Economagic.com
Disclosure : Long SKF and SCC (Sept/Oct worst seasonal period for stocks)
ComsumerGDPAnal;ysis.jpg
The chart attached shows that when the number of months to sell a house exceeds 8 months (B on chart), while the consumer misery index is above 10 (C on chart) the Consumer GDP has always sunk to ZERO or less (A on Chart). The rugged and tough USA consumer has just completed 17 years (ie 1991 to 2008) of positive GDP consumption and now it is beat.
The Number of months to sell house is the efftect of banks changing the rules, consumer under stress and of course wanting a price thats not current market price.
My conclusion: That a USA Consumer led recession is a slam dunk. Consider this view with the unemployment rate of change chart sent previously and I feel odds are 100%. My guess 2008 Q3 will see it start.
This view has just been reinforced by Northern Trust comments today (29/08/2008 Asha Bangalore) on the latest USA Consumer spending statistics ..” inflation adjusted consumer spending fell 0.4% in July”..
,,” Consumer spending will have to advance in leaps and bounds in August and September for a flat reading in the third quarter. In other words, a decline in third quarter consumer spending is nearly certain. Assuming our forecast is accurate, this would be the first quarterly decline in consumer spending since fourth quarter of 1991. If consumer spending posts a decline, it should not be surprising to see a minus sign attached to change in GDP during the third quarter.”…
And I believe, negative GDP in 2008 Q4 and 2009 Q1.
Note: 1991 was the last Consumer led recession.
Definitions:
1) Months to sell a house is from the US Census Bureau
2) The misery index is the headline inflation rate plus unemployment rate plus (inverse) change in house prices (house price measure is from the US Census Bureau (not Case Shiller or OFEO, so its very conservative).
3) Consumer GDP last data point is 2008 Q2, unrevised.
Chart data from : www.Economagic.com
Disclosure : Long SKF and SCC (Sept/Oct worst seasonal period for stocks)
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