New Data Show Rising Chance of U.S. Recession

A year and a half ago, in the middle of 2022 we were promised a recession by Wall Street. Imminent was the word used, and professional economists kept beating the drum that it would arrive by next Friday, whenever that was.

I’ve spent some of that time reporting that such forecasts were well out of line. I was correct. No recession appeared. None, zip, nada, whatever way you put it, apart from the economist who said there was one earlier this year but nobody noticed.

Now Wall Street is quiet on the matter of recession. I’d say the sound of crickets was all that I hear. But it’s less than that. It’s more like a winter morning in the countryside — no sound at all.

But that lack of comment is startling as now signs are emerging that there is an increased chance of a recession.

Growing Consumer Debt Problems

First, credit card delinquencies are rising, according to data from the New York Federal Reserve. The new report shows how overall the level of newly delinquent credit card borrowers has doubled more than doubled to 2% in the first quarter of this yer up from 0.9% a year earlier.

The group most impacted are Millennials, the cohort born in the 1980s. The report explains things as follows:

• “Millennial credit card delinquency exceeds pre-pandemic levels while baby boomers, generation X, and generation Z are at or near their 2019 averages.”

That matters because Millennials are the largest group employed across the U.S. If they are increased so strapped for cash that they are delinquent on their credit card bills, it doesn’t auger well for the economy as a whole.

And there is another factor too. This data lags from as much as nine months ago. At that point the Fed hadn’t completed its increases in interest rates which paused recently. In other words, borrowers in difficulty would likely now be feeling the pain of higher bills even more than they did back when the data was collected.

Cool Sea-borne trade stats

International Trade is cooling fast. When the U.S. economy is doing well then we see international trade doing well. But the opposite is happening now.

The price of shipping containers has dropped dramatically across the entire world. A forty foot container would cost you $1,382 on November 30, according to Drewry’s World Container Index which tracks the data.That price is down from $2,139 a year ago.

This is likely the result of there being less seaborne trade brining manufacturers goods from emerging economies such as China and Vietnam to richer ones such as the U.S. and western Europe. It doesn’t augur well for the U.S. economy.

There’s more.

Investors Fleeing to Government Bonds

The interest rates for 10 years U.S. government bonds have fallen shortly indicating that investors want to buy something less risky. The interest rate on a 10-year bond was recently 4.3%, down from around 5% on October 19, according to data from YCharts.

This matters because bond investors tend to be the smartest people on Wall Street. The fall in interest rates indicates they are worried about slower growth. The conner for other investors should be if the interest rates continue to fall as that could easily signal an imminent recession if other indicators contour to sour.

Stay tuned for more coverage on this matter as new data gets revealed.