No Signs of a Recession
April 22, 2022
While many media outlets are anticipating a recession coming, we are forecasting a "soft landing." How should you prepare for when the economy slows down to maximize profits? Catch our newest TrendsTalk episode with ITR CEO and Chief Economist Brian Beaulieu to learn more.
The below transcript is a literal translation of the podcast audio that has been machine generated by Rev.
Hello. I'm Brian Beaulieu, CEO and Chief Economist for ITR Economics. Thank you for joining us for this edition of TrendsTalk.
Short and sweet, to the point. In the media, there's a lot of doom and gloom, negative talk, recession this, recession probability that. I got to tell you, we vehemently disagree with that. There was an inverse yield curve that was intraday, which statistically is insignificant. We're following the retail sales trends very carefully. We're back to using the Redbook weekly data, which has not fallen off since the war. Americans are continuing to spend as they were before the war. That's incredibly good news.
Department stores are up 5.2%. We have total retail sales at 15.8%. So, obviously, e-commerce is propelling that further forward. No sign of slacking out, the consumer balance sheet looks great. They're handling their debt really well, including mortgage debt. I know people are concerned about housing prices, housing starts slowing down because of interest rates going up. We've done the analysis on that. It's just going to change the slope. It isn't going to put these things into your reverse. Businesses are in really good condition also.
Now, many of you have seen our leading indicator dashboard. Next time you see it, you're going to find that single family housing starts has gone from that amber decline into green rise. And we're going to put in the macro indicator column, soft landing is indicated. We've had that 112 rise for at least three months; it has been three months. It satisfies our technical criteria for a probable low. I ran the numbers out through June. It looks like it's going to hold, means that we're on target for our third quarter 2022. [inaudible 00:02:07] already changed for housing stars for single family units and that puts us on target for our business cycle low out there in 2023. It's beginning to fall in place. This is, if anything, just a couple of months early. I think it's a great signal.
We have a tentative upside signal coming from total industrial production capacity utilization. That may not hold. I mean, we run the numbers and that one isn't going to show up on the dashboard just yet. It may, but we want little higher probability of its occurrence. The housing starts one, that's good news. The Redbook data for retail sales is good news,. Now, we follow this very carefully. As you know, with the March data for retail sales, overall retail sales, adjusted for inflation, that 112 already changed. So the March '22 compared to March '21 data came in at like minus 1.4. And that obviously got us looking into the data, and it's because last year, February to March raw data increase was the single strongest rise, 28% increase, that we've seen in the history of retail sales. So that's what we call reciprocal noise. It's not really an issue. It's not indicative of the consumer running out of fuel.
Speaking of fuel, the numbers continue to show that the increase in fuel costs, while a lot of people are lamenting this and saying they're not going to take their boats out as much or take the long drive. Let's see how that's really going to work out. There's lots of disposable personal income out there, adjusted for inflation. People are getting raises at their jobs. History suggests that retail sales, even with these higher energy prices, are going to continue to rise. I can't imagine we're going to tell our kids we're not taking that drive to the lake or taking the drive down to see Grampy and Grandma down in Florida, Georgia, or South Carolina.
So from our perspective, it's still a soft landing, not a recession. We think it would be a mistake to start battening down the hatches instead of figuring out where you need to invest in order to really maximize your upside potential, as the economy slows down, and position yourself to be ready for that next power rise that's coming in late 23 and will encompass all of 24. That's where your head should be at. Thank you for listening to me, I appreciate it, and hope you join us for another TrendsTalk. Brian Beaulieu, ITR Economics.