SINCE the beginning of the year, various experts and media articles have been asking: is the US in a recession yet, or will it start later than expected? Will the US economy go crashing down, or will it be a soft landing? One thing is for sure: and that is Washington heading for the inevitable.
According to Chris Watling, Chief Executive of Financial Advisory Firm Longview Economics, the US is on the brink of recession based on its brutally bad economic data.
Watling made the remarks in a Consumer News and Business Channel (CNBC) interview this week.
He said among the factors pointing to a looming recession is the latest data of the leading economic index for the US, which went down by 1.2% in March, and this is the lowest the US had since November 2020.
“Every time you’ve had that in the US, you’ve had a recession. So, i think it’s coming, it’s on its way. It’s just a timing issue,” said Chris Watling, Chief Executive of Longview Economics.
In March, the inversion reached 103.1 basis points, and this represents the largest gap between longer-term yields and shorter-term yields since 1981, at a time when the US economy was in its early months of recession.
Watling also warned of the consequences for equity markets once the US is in its recession.
He explained,
“They won’t come through it unscathed in our opinion. I’m not even sure about relatively. The reality is if you look at profit margins, they went to record highs in 2021 and a bit of 2022…”
“…and of course, when you have a lot of inflation around, you can get very good operating leverage so you can get record high-profit margins. When you get into a recession, we’ve got to do a double hit on profit margins. You’ve got to normalize them back to normal levels, and then you’ve got to price in a recession,” said Chris Watling.
Federal Reserve Economists also believe that the recent banking crisis will trigger a mild recession in the US later this 2023, sparking a jump in unemployment.
The Fed economists estimated that the US would fully recover by 2025.
US stocks dropped on Thursday as market sentiment was dampened by a slew of anemic economic data and Tesla’s operating results in the first quarter.
Data issued by the US Department of Labor on Thursday said US initial jobless claims in the week ending April 15 increased to 245,000, up from 240,000 in the previous week and higher than the market forecast consensus of 242,000.
A manufacturing index released by the federal reserve bank of Philadelphia on Thursday sank to minus 31.3 in April from minus 23.2 in March, while market forecast consensus stood at minus 19.4.
And, according to data issued by the US National Association of Realtors on Thursday, the US annualized rate of existing home sales in March slid to $4.44-M, down from $4.55-M in the previous month. The latest estimate was weaker than the market expectation of $4.-M.
