AN, I don’t get your point. The Census Bureau is tracking the auto sales, and they are down 2.4% in June’s report. So the new car sales decline is an indicator of consumer spending decline. However, I see your point that it does not mean GDP will decline since cars can still be manufactured abroad. But we do have a recession in the auto states already, as unemployment is very high and home prices are depressed and foreclosures rising (not from ARM resets but from unemployment).
The biggest indicators of recession are the inverted yield curve and the decline in housing permits. This housing decline already brought down GDP to 1.6% in Q3 and will depress it even further in Q4.
So AN the burden of proof is on you to show why the big drop in housing permits/starts will not bring a further decline in GDP. I see this latest drop in permits as an indication that permits and starts are continuing their downward spiral, further depressing residential investment, a very important contributor of GDP. In Q3, res. inv. was down 17%, and was the main reason for the GDP decline. Also you have to prove why this time the inverted yield curve is not indicating a recession. The bond market is expecting a recession, although the stock market is not. This happened in the last recession, as the stock market rallied right into the recession. Have you read Roubini’s commentary, and what do you disagree with?
My burden of proof will be to research why the Iraq war is not stimulating the economy, as the Korean and Vietnam wars did.
My comment about being prepared for recession was meant to show that we don’t have to be worried about a recession. If it comes, we can be ready. If we have a job that is sure to be eliminated, we can change jobs or sell our house or move to another city. We can shift our investments. Sometimes I’m not sure if people disagree on the recession because they truly believe it is impossible, or because they are in denial because a recession would cause them financial harm. I wonder why a recession is so hard to believe,because they are normal part of the business cycle. Saying we cannot have a recession is like saying we cannot have rain. I don’t get it….
