Broad economic activity in the United States contracted sharply in first-quarter 2015. Underlying activity was so weak that the heavily-gimmicked and bloated reporting of headline U.S. Gross Domestic Product (GDP) activity showed an outright contraction…There is no rebound developing in second-quarter GDP, which should become increasingly evident in the next two months. Leading-indicator signals from real retail sales and new orders for durable goods, as well as early reporting on industrial production, all are consistent with headline, back-to-back quarterly downturns. – John Williams, Shadowstats.com
On Friday we found out that the University of Michigan Consumer Sentiment poll dropped to 6-month lows during May. As Bloomberg News describes: there is month-to-month weakness which doesn’t point to strength for consumer spending in May. The current conditions component ends May at 100.8 vs April’s 107.0 in weakness that also hints at trouble for May’s jobs market. A decline in the expectations component, to 84.2 from 88.8 in April, points to less confidence in the longer-term jobs outlook.
What’s interesting about this sentiment reading is that, historically, there is a strong correlation between consumer sentiment/confidence readings and a rising stock market. The S&P 500 hit a new all-time last week and yet consumer sentiment is tanking.
In addition, the Chicago PMI (Purchasing Managers Index) crashed to a 6-year low. The overall level is back to where it was when Lehman collapsed. New orders, production and employment all contracted in May. The index has dropped 5 out of the last 7 months, plunging in 3 of the months. The index measures manufacturing and non-manufacturing activity in the Chicago region, which is considered a manufacturing “bellweather” regaion. The overall index dropped to 46 from April’s 52.3 reading. 53.1 was expected. A reading below 50 means that manufacturing activity was contracting in May.
I wrote an article for Seeking Alpha in which I presented data which supports the thesis that U.S. economy is in real trouble. This is despite the reputedly “strong” housing market market, which is primarily of a product of Fed-fueled housing price inflation and individual “investor”/flipper activity. The flippers are about to get stuck holding a big “bag” of extremely overpriced homes.
I believe the data I presented above indicates the likelihood that the U.S. economy is currently in a recession. If not a recession, then it’s headed into one. I believe this economic downturn has a high probability of being worse and last longer than the 2009 recession.
You can read the entire article here: The U.S. Economy May Be Entering Crash Mode