Is This The RECESSION?! Here’s The FACTS You Need To Know!!

It’s pretty clear that we are heading For a recession now some think it will Come in two years others think that it Could come next year but could we Already be there That’s exactly what i’ll be exploring in This video i’ll be taking a look at some Really important data that shows that we May already be close to the cliff so Don’t go anywhere [Music] All right you know heads it’s guys Cousin manny here with a few home truths For you okay fact number one our kid guy Right he ain’t no financial advisor you Know he’s just a bloke on youtube what Makes them videos for entertainment and Educational purposes yeah so get on the Blower to a real financial advisor if You want to know where all your money’s Gone all right fact number two this here Channel right is the best place for Content about all the important economic Goings on in the world today global Macro digital assets what the folks who Run the world are up to everything you Need to know so bang that subscribe Button and give the bellaring too then You get a ding-dong whenever there’s a New video or okay smashing right pay Attention and let’s hear what g-man has To say about a recession and that sounds Proper nasty doesn’t it Sorry about him

Now part of the reason why we’re even Asking this question is because of the Fact that in the first quarter of this Year the u.s surprisingly saw negative Growth this was at first estimated to be A 1.4 percent fall in real gdp compared To the previous quarter Despite this drop though the markets Didn’t react That’s because many market participants Thought that the drop was merely because Of a technical glitch in gdp accounting The tldr is that inventories were much Lower in q1 of this year than they were In q4 of last year when you have a Negative change in inventories this Drives down the gdp number the thinking Was that q4 had abnormally high Inventory levels on account of Stockpiling so the correction to a Normal level now i talked about this in Much greater detail in the video i did About two months ago which i’ll leave in The description for you i should also Point out that just last week this Number was further revised down by the U.s commerce department the actual q1 Contraction was 1.6 so an even larger Fall more on that in a bit However the exact figure or indeed the Reasons for the contraction are of Lesser importance than what it actually Signifies This is because a recession is generally

Understood to occur when you have two Negative quarters of economic growth Yes i know that the actual declaration Of a recession is determined by the National bureau of economic research but Forgive me if i don’t defer to the Proclamations of the quote business Cycle dating committee So depending on what happens with the q2 Numbers the u.s could very well be in a Recession long before all the analysts And economists predicted it would be Therefore whether the united states is Currently in a recession rests in large Part on what the q2 gdp numbers are the Numbers are only expected to drop in August but currently there are some Estimates that the u.s has seen further Negative growth For example last week the federal Reserve bank of atlanta released what it Terms the gdp now forecasts According to the latest estimates of the Model it has q2 gdp falling by 2.1 So put that in your pipe and smoke it Now perhaps what’s even more interesting Here is the evolution of these forecasts Over the past three months They’ve gone from an estimate of over Two percent back in may all the way down To an estimate of minus two point one Percent on the first of july what that Shows is that based on statistical Models we could indeed be heading for a

Technical recession But let’s put the statistical models Aside for a moment we can try and come To a rough idea of how gdp numbers could Look based on other economic factors That impact on it Perhaps one of the most important Factors in the calculation of gdp has to Be consumer spending and in the us Consumer spending is one of the biggest Drivers of the economy it makes up a Full 70 Of all u.s economic output crazy i know Anywho if there are any signs that Consumer spending is starting to turn Then this could be the clearest sign yet That the gdp numbers could be weaker Than expected Well Let’s rewind back to q1 again recall That i said that the numbers were Actually revised lower recently by the Commerce department One of the primary drivers behind this Adjustment was the lower than expected Consumer spending it was up by only 1.8 In q1 versus an earlier forecast of 3.1 Percent This is notable as it was also the Softest pace of growth in consumer Spending since december 2020 So that was q1 But we’re interested in getting an idea Of what went down in q2

Well something that we can take a look At is retail sales numbers these are Published monthly and they can give an Idea of how that consumer spending is Holding up And in may we saw a surprising fall in Retail sales this was the first full We’d seen in over five months and was Driven by lower auto sales and higher Petrol prices which pulled spending away From other goods Now of course that was may When things were a bit more rosy and the Possibility of wide-scale food shortages Wasn’t yet apparent who knows what the June numbers will look like but i for One i’m not too optimistic Now we can get a rough idea of this by Looking at consumer confidence surveys These are incredibly helpful because They’re also forward-looking and can Give guidance on spending well into q3 Well about two weeks ago a closely Followed university of michigan survey Showed that consumer sentiment hit a Record low in fact this was the lowest Recorded level that the survey had Yielded since it began 70 years ago This was a 14.4 drop since may and one Of the biggest drivers of that Uncertainty was of course high levels of Inflation Perhaps most alarmingly 79 of those who Responded said that they expected these

Hard times to continue this is also the Highest response rate since the 2008 Financial crisis Not long after these numbers from the University of michigan were released we Also had consumer confidence numbers Coming from the conference boards index Which also showed a fall This is important because confidence Will impact on consumer spending if You’re concerned about your future Earnings potential you won’t be spending As much which is only logical So that’s consumer confidence and Spending one of the largest contributors To gdp ain’t looking too hot for q2 But how are the other factors looking Another contributor to the gdp stats is Of course manufacturing now while its Share of u.s gdp has been declining over The past 30 years it still makes up more Than 10 percent So how has manufacturing output been Looking over the past few months well Not too good according to some pmi data For those who don’t know a purchasing Manager’s index or pmi is a survey That’s sent out to senior executives at Large companies across the u.s It basically amalgamates things like new Orders inventory levels production Supplier deliveries and employment into A single index Well on friday the institute of supply

Management released its ism Manufacturing index it showed that Factory activity slowed more than Expected in june and is at a two-year Low There was also more pmi data coming from The likes of s p with its own Manufacturing pmi the index was at 52.7 Which had fallen considerably since a Reading of 57 in may This was also the lowest the index had Been since june 2020 a time when we were Near peak coveted concerns According to chris williamson of s p Quote the pmi survey has fallen in june To a level indicative of the Manufacturing sector acting as a drag on Gdp with that drag set to intensify as We move through the summer There were many things driving this of Course they included higher interest Rates lower demand supply chain issues And of course Higher inflation Speaking of which while we’re all Focused on the cpi measure of inflation Manufacturers are closer to the coal Face of price pressures that’s why There’s a separate producer price Inflation ppi index This was also at record highs in may Breaking through 10.8 Contrary to popular opinion producers Can’t fully pass on these cost pressures

To their consumers without hurting their Bottom line That’s because higher prices mean Potentially lower demand which net net Means lower profitability This can help to explain why higher Inflation has these manufacturers more Bearish than usual On top of the ism and s p data the fed Also does its own regional manufacturing Surveys these two have shown that Business activity has shrunk over the Past month The only district that showed any growth Was that of the kansas city fed and even Then respondents blamed excess inventory And over orders for the positive uptick While we’re on the topic of higher Inventories it’s worth noting that Higher retail inventories are a Harbinger of lower consumer spending Fewer people buying means that those Products start piling up This is something that kathy wood of arc Invest talked about on cnbc squawk box a Few days ago Higher than average stock levels at some Of the best managed retailers in the Country points to consumer demand not Lining up with expectations so bear that In mind Moving on though another component in Gdp and in general consumer wealth is Construction and property so how have

These been looking recently Well up until about a month ago the u.s And indeed the global housing market Seemed to be one of the hottest sectors Going The post-pandemic buying spree spurred On by record low rates led to Skyrocketing prices However if you watch one of my previous Videos on the housing bubble linked to Below you’ll have seen that things were Beginning to turn And in the past few weeks it’s been Getting progressively worse For example in june we had a surge of Listings in the united states Total listings were up 19 percent from The same time last year Now this is important because more Listings mean more housing supply Holding demand equal more supply implies Lower prices However demand hasn’t remained constant That’s because as the feds started Pumping interest rates mortgage rates Started climbing aggressively The average interest rate on a fixed 30-year mortgage is now at 5.98 Which is up considerably from the end of The first quarter These higher rates mean that the cost to Service the mortgage on an average home Has gone up by almost 50 percent This is already starting to filter into

Home sales across the country according To data from the national association of Realtors sales fell for a fourth Straight month in may and are down by 8.6 from a year ago so with lower demand And an oversupply on the market you can Be sure that prices are likely to start Adjusting downward This slowdown in housing could have Negative implications for the economy in A number of ways Firstly if there are fewer houses being Built then that means the construction Sector won’t be reporting strong numbers Which of course feed into gdp But perhaps a bigger factor is the Impact that falling house prices have on Consumer confidence For most people their home is the most Important and valuable asset they own It’s inextricably tied to their net Worth and can also be used as a means to Obtain additional financing to buy other Things The moment that house prices start Coming down the less wealthy people feel And therefore the less likely they are To spend on goods they don’t need On top of that you also have to consider The impact that the rising mortgage Payments could have on disposable income After paying bills there’s less money to Spend on other goods and services This could become particularly acute for

Those people who took out adjustable Rate mortgages anytime over the past Five years Interest rates are already the highest They’ve been for years and when these Adjustable rate mortgages start to Adjust up they’re going to seriously Increase mortgage servicing costs for Said borrowers Yet again this implies less income after Paying bills Okay so there seems to be a reasonable Likelihood that we could have a second Negative quarter of gdp growth thereby Implying a technical recession But even if the business cycle wonks Decide not to label it a recession or Even if we are able to eke out minuscule Growth of some kind Dark economic clouds are gathering on The horizon This is because of one thing only and That’s fed policy it seems as if the Goal of achieving a soft landing will be As elusive as a bitcoin etf And the fed has decided that trying to Strike a balance between growth and Lower inflation is going to be too tough To pull off After reaching the highest cpi inflation Since 1981 the fed has decided that they Have to bring down inflation at all Costs This was confirmed at the fed’s most

Recent meeting back in june where they Raised interest rates by 75 basis points This was one of the largest increases in The fed’s fund rate since 1994 And it seems as if this is only the Beginning That’s because many seem to also be Expecting a 75 basis point increase in The july meeting as well If we take a look at the fedwatch tool Over at the cme there is an 82 Probability of another 75 basis point Raise at the next meeting There are also a number of fed officials Who are potentially in favor of another 75 bips these include the likes of Loretta mester of the cleveland fed john Williams of the new york fed and mary Daley of the san fran fed This hawkish stance is in stark contrast To the tone that was struck by most Officials at the beginning of the year The fed chair jerome powell has also Been incredibly hawkish of late Last week during an event at the European central bank powell said that We should accept a higher recession risk In order to combat that inflation he Said quote is there a risk we would go Too far certainly there’s a risk the Bigger mistake to make let’s put it that Way would be to fail to restore price Stability Now you don’t need to be fluent in

Fedspeak to know what that means we are Going to get inflation under control the Economy be damned And the fed will have their work cut out For them that’s because they are so far Behind the curve that it could be tough To rein in that inflation you have a Very real risk of the fed driving the Economy into the ground as inflation Continues to run rampant This scary economic scenario is called Stagflation something that i’ve talked About on the channel before Now we haven’t seen stagflation since The 1970s and many of the same inflation Drivers then supply shocks appear to be Playing out right now The only difference is that back then Inflation was only brought under control When paul volcker took the fed’s fund Rate to nearly 20 Today it’s at 1.5 percent and things are Already beginning to break Time to start wrapping this up now i Don’t mean to be a gloomy guy but the Data doesn’t lie the us is probably in a Recession and we don’t need some Economic agency to confirm it But let’s assume even if we somehow Manage to avoid the negative growth for Q2 there seems to be near universal Agreement that we are heading into a bad Recession over the next year the fed is Trying to achieve the soft landing of a

Plane that’s being built as it falls From the sky If they’re lucky they can perhaps Achieve a hard landing but a crash Landing is an equally likely scenario Now although this analysis was done on The u.s economy other countries are not Looking too good either In fact in the case of europe they’re Perhaps in an even worse position to Ride out this economic storm That’s because europe is on the brink of An energy crisis that could see the Rationing of gas and power in the next Few months They’re also facing the prospect of food Shortages thanks to russia’s invasion of Ukraine And the resulting sanctions more about That in the description moreover some European countries are seeing consumer Inflation in the double digits and the Ecb appears poised to raise interest Rates for the first time in 11 years There is near unanimous consensus that Europe will not be able to escape a Recession So Is there any hope or are we all doomed To succumb to the economic storm of fire And brimstone Well for one we could see the who Officially declaring an end to the Pandemic this would signal an end to

Most if not all restrictions which would Do wonders for unclogging those supply Chains China appears to be cautiously opening Back up and if it stays the course then The worst of the shutdowns and supply Chain headaches could be behind us Here’s hoping Something else that would help to ease The pressures on the global economy is An end to the war in ukraine this would Allow the country to start exporting Food again and will mean that some of Those sanctions can be lifted How likely either of these outcomes are Is really dependent on the decisions Taken by some powerful people so let’s Hope they make the right ones And that’s it for my video today folks But i’m keen to get your all-important Feedback do you think we’re in a Recession or is there any chance that we Could avoid it i’d love to know in those Comments below While you’re down there you absolutely Have to check out my socials page this Has links to all the other places that You can follow me off the tube these Include the following My telegram channel where i share market Analysis and views Twitter where i share news and other Tips Instagram and tick tock for behind the

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