Three Indicators Pointing to a Recession for the U.S Economy
Mark my words, the U.S. economy could be headed towards a recession, not economic growth. There’s a lot of data that suggest an economic slowdown could be imminent in the later part of 2018 and early 2019.
There are three data sets that are worth watching closely: construction spending, cars sales, and exports.
Construction Spending Growth Rate Tumbles 76%
You see, construction spending in the U.S. economy is currently growing, but the pace of growth has slowed down immensely. Please look at the chart below, which shows this very clearly. It details the year-over-year change in monthly construction figures in the U.S. economy:
(Source: “Total Construction Spending,” Federal Reserve Bank of St. Louis, last accessed April 2, 2018.)
In early 2015, construction spending in the U.S. economy was increasing at a rate of about 12.5%. Now, this rate has decline to about three percent. If you look at the percentage change, one could say the construction spending growth rate has tumbled 76%.
Why is this worrisome? Well, construction spending is one of the leading indicators of a recession. Look back any previous economic slowdown in the U.S. economy; whenever the construction spending growth rate tumbled, a recession followed. This time around, it could be very similar.
Long-term readers of Lombardi Letter shouldn’t be too surprised by this. We have talked about construction spending extensively in these pages.
Vehicle Sales Suggesting Dismal Consumer Spending
Car sales in the U.S. economy are worth watching, too. Why? Because it shows how U.S. consumers are feeling. It’s essentially an indicator of consumer spending and consumption. More cars being sold could be taken as consumers feeling good about spending. On the other hand, if car sales are declining, it means a recession could be looming.
Don’t forget that consumption amounts to roughly 70% of the U.S. gross domestic product (GDP).