Lots of people have been huffing and puffing about whether or not the US economy will go into a recession in the near future, with Menzie Chinn and Jim Hamilton at Econbrowser saying it is now about 50-50 whether or not the US economy will go into recession by the end of 2020. I do not have a horse in that race, but I am struck that a new odd phenomenon has recently appeared in the US economy, a split between sectors regarding their performance that recently seems to be increasing.
The sectors are manufacturing, which has been declining now for several months and is the harbinger of recession. Meanwhile single family permits are up, and YOY permits overall are up by 8 percent that may well hold off any recession if it continues to accelerate. It is unclear which will win out.
So the general story of manufacturing looking to decline while housing construction is likely to rise still holds for the fairly near future.
The manufacturing decline has been widely tied to the trade wars, which would appear to be at least partly responsible. It is also the sector that through trade may be experiencing the pressures of the slowing of global growth.
“manufacturing, which has been declining now for several months” which is good news if you despise The Dumpster®.
I don’t think the trade wars matter at all. This is where we disagree. Most of the exports barely account for any growth at all and the imports have been uneffected because frankly, they are ignoring the tariffs and using tactics to avoid them.
The real problem is weakening corporate debt. Auto,Tech both will have had a near 20% loss in real profit since the middle of 2015 and if you want to add in the sagging shale market, you have 80% of total manufacturing output potential in potential crisis.
You have barely scratched the surface. Most of it is overcapacity driven.
A correction. It is not housing starts that are up, but single famiily permits, and YOY, permits overall by 8 percent. So the general story of manufacturing looking to decline while housing construction is likely to rise still holds for the fairly near future.
I fixed it.
Permits are not starts. Having been in and around construction most of my working life means that I have seen a whole lot of projects go on hold, even after the permitting process finishes. That’s not so common for individual single family house building, but it’s certainly true of commercial projects and larger residential developments. You can plat out a subdivision and get permits to build housing, but then fail to sell the lots to builders who will actually build those houses.
My personal, non-technical take on the economy is that we will be in a noticeable slump, if not a full blown technical recession, by about mid-2020.