The US economy is veering towards recession.
The ”official” GDP growth number is so heavily massaged that it borders on fiction. So as far as economic growth goes, if you want a clear picture, you need to look at nominal GDP growth. The reason for this is that because the Fed greatly understates inflation, the official GDP numbers are horribly inaccurate.
By using nominal GDP measures, you remove the Feds’ phony deflator metric. With that in mind, consider the year over year change in nominal GDP that has occurred.
Historically, anytime the chart drops to 4, the US has been in recession. It’s been around this number ever since the recession “ended” in 2009. Small wonder this “recovery” feels like a recession to most Americans.
However, even in this weak climate, we are getting signs that the US economy is rolling over.
Consider the recent rejections of credit applications data:
Then there is the collapse in corporate profits. (h/t Societe General)
Indeed, annual corporate profits fell in 2014. The last time profits fell like this was in 2008, when the US was already in recession.
We also have the Regional Manufacturing Surveys and Dallas Fed Inventory (both H/T Not Jim Cramer) hitting levels associated with recessions.
Numerous data points are showing the economy is approaching if not already in recession. And yet stocks are pricing in economic perfection. By the time they catch on… we’ll see a serious market correction.
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