Profit Confidential Says Three Key Indicators Suggest a U.S. Recession is Likely in 2016

Profit Confidential weighs in on three economic indicators that suggest a U.S. recession, not economic growth, is the most likely scenario in 2016.

Profit Confidential (www.ProfitConfidential.com), an e-letter of Lombardi Publishing Corporation, a 29-year-old consumer publisher that has served over one million customers in 141 countries, comments on the U.S. economy and says three key indicators suggest a U.S. recession, rather than economic growth, is most likely to occur in 2016.

“Many expect the Federal Reserve to start raising its short-term interest rates for the first time in nearly a decade, believing the U.S. economy is strong enough to withstand a rate hike,” says economist and lead contributor Michael Lombardi. “But three leading economic indicators suggest that a recession, not an economic growth, is the most likely scenario for 2016.”

Lombardi explains that the U.S. gets more than 70% of its Gross Domestic Product growth from consumer spending. Unfortunately, many big U.S. retailers have been reporting significantly lower revenue and earnings. On top of that, the inventory-to-sales ratio of U.S. retailers is diverging. Since 2012, retailers have been piling up inventories as sales have slowed. The inventory-to-sales ratio for the retailers now sits at its highest level since 2009, when the U.S. economy was in the midst of a severe recession. (Source: “Retailers: Inventory to Sales Ratio,” Federal Reserve Bank of St. Louis data set, last accessed December 16, 2015: https://research.stlouisfed.org/fred2/series/RETAILIRSA)

“On top of that, a leading indicator of manufacturing in the U.S., the drop below 50 of the Purchasing Managers’ Index [PMI], suggests a reduction in the manufacturing sector,” Lombardi continues.

The PMI registered at 48.6 in November, making it the first time in 36 months that the PMI has been below 50. (Source: “November 2015 Manufacturing ISM Report on Business,” Institute for Supply Management, December 1, 2015; https://www.instituteforsupplymanagement.org/ISMReport/MfgROB.cfm?navItemNumber=29317)

“Finally, the Industrial Production Index, which is tracked by the Federal Reserve, measures the output of manufacturing, mining, and electric and gas utilities based in the U.S.,” says Lombardi. “Industrial production in the U.S. economy started falling just before 2015. It rebounded this past summer and is now back on a familiar downtrend. With the markets near record highs, there isn’t much talk of a recession. But key economic indicators are flashing red—just like they did in 2007 and early 2008—thus pointing to a recession in 2016.”

Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. More information on Lombardi Publishing Corporation can be found on its web site at www.LombardiPublishing.com.

Release ID: 99567