Hold the hysteria. The US economy is OK, so far.

Summary: The economy is slowing. We are probably not in a recession, let alone beginning the end times depression doomsters have so often predicted. On the other hand, continued slowing seems likely, and a little more and we will have a recession. Let’s look at some key indicators.  {First of two posts today.}



  1. Manufacturing; one piston of the US economy’s engine
  2. Transportation and trade
  3. The Bottom Line: US & world growth
  4. For More Information


(1)  Manufacturing; one piston of the US economy’s engine

Zero Hedge: “Durable Goods Devastation…Scream Recession

December’s Advance Report on Durable Goods  shows a continued slow decline, especially new orders. The monthly decline in December was large, but not unusually so for this volatile data. It doesn’t scream “recession”.

December 2016 Durable Good New Orders: MoM, SA

Nor does the year-over-year decline of 1.7% SA scream “recession”. It is not even unusual. New orders often decrease without a recession following; it has happened several times during this expansion. The data only goes back to 1993.

December 2016 Durable Good: New Orders YoY. SA

(2)  Transportation and trade

There’s been much hysterical clickbait about the freight volume, usually looking at narrow indicators (e.g., train carloads, affected by bulk oil and coal shipments) and misleading indicators (the Baltic Freight index of cargo rates). The most reliable indicator for the US is DoT’s Transportation Services Index for freight volume. As you can see, it’s been slowing YoY SA through November. It is a volatile index (clickbait fodder), and has been negative often before. Data goes back to 2000.

November 2016 Transportation Services Index - Freight volume

One of the best indicators of trade activity is the World Trade Monitor by the CPB Netherlands Bureau for Economic Policy Analysis. As you can see, nothing is happening. The numbers are volatile month to month, but show steady slow growth during the past two years.

November 2016 World Trade Monitor

(3)  The Bottom Line (updated with Q4 GDP)

The US economy…

…is slowing, but slowly. There are so many indicators. I suggest watching the Atlanta Fed’s GDPnow model’s forecast. It does no better than carbon-based economists, but is easy and fast to consult.

This morning we got the Advance Estimate for Q4 real GDP: a weak +0.7%, Remember: the average revision is 1.2% with a standard deviation of 1% (i.e. 68% of the revisions are between 0.2% and 2.2%).

Since the crash the economy has grown slowly — with two brushes with recession, both prevented by government stimulus. Fiscal and monetary stimulus in Q4 of 2010; QE4 in Q4 of 2012. Now the economy is slowing again. I suspect we will have, at best, a third brush with recession.

2015 Q4 real GDP: YoY, SA

The world economy

We do not have anything similar for the world economy. The most reliable current indicator in my opinion is the OECD’s Composite Leading Indicator (CLI). Their January report with November data shows continued stable slow growth.  100 is the long-term average of economic activity; the arrowheads mark inflection points.

OECD’s Composite Leading Indicator

November 2016 OECD Composite Leading Indicator

What about China? The CLI for China is 98.4, flattish for the past five months. Neither its stock market or economy is burning. The Shanghai Stock Exchange Composite Index is down 13% YoY and down a quarter from the December high, but stocks have little role in China’s economy.

November 2016 OECD Composite Leading Indicator - China.


The US economy is slowing, but slowly. The world economy is stable. But many forms of economic, social, and geopolitical stress are increasing. Some, like the pricing prices of oil, natural gas, and oil — and the US presidential election — have few or no clear precedents.

This could become an exciting year. Stay alert and nimble.

For More Information

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2 thoughts on “Hold the hysteria. The US economy is OK, so far.”

  1. Reduced production does not lead to a recession when the reduction is in the swing rather than base production. Debt servicing pushes up the necessary base production. You can’t go into dhort term hibernation when you’re driven by debt servicing.

    Our economy has been thrust onto a narrow high ridge by short term thinking and impatience. The only reason the US is doing well is the printing of money and the rest of the world being in worse shape.

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