Key economic reports this week will set the US recession outlook
|Recession is on the horizon but will it start in Q2, Q3, Q4, or in 2023? Four key reports this will provide clues.
Four key economic reports this week
- Retail Sales for April - 2022-05-17
- Industrial Production for April - 2022-05-17
- Housing Starts and Permits for April - 2022-05-18
- Existing Home Sales for April - 2022-06-19
After those four economic reports we will have a better look at where recession stands.
The following charts are all courtesy of Bloomberg Econoday.
Retail Sales projections
Industrial production projections
Housing starts and permits projections
That's a projected 1.5% decline on housing starts and 2.9% decline on permits.
I'll take the under on both (report weaker than consensus).
Existing Home Sales
That's a 2.0% decline on existing home sales.
I'll take the under.
Second quarter outlook
Those four reports will set the tone for second-quarter GDP. Retail sales is likely the most important and housing starts the least.
I'll take the under on all of the reports. But a small miss to the downside on retail sales might not be enough to put GDP forecasts for the quarter in negative territory.
Retail sales of 0.8% is a pretty strong forecast. Even factoring in the CPI (up 0.3% month-over-month) those are strong numbers.
The retail sales consensus range is huge this month: 0.4% to 2.0%. Retail sales numbers under 0.4% will have a stagflation context.
If we see an upside surprise like 2.0% or even 1.0%, bond yields will soar and so will rate hike expectations.
Powell is probably hoping for weak numbers across the board. There's a very good chance he gets them.
Will April seal the fate?
If the numbers are small misses to the downside, probably not.
Upside surprises may postpone a recession until later this year. A negative retail sales print with falling industrial production and a big miss on existing home sales will mean a recession may have already started.
I expect significant weakness and a recession sometime this year, not next. The May reports will tell us more.
Finally, it's not nominal retail sales that matter, but real (inflation adjusted sales).
For a look at April CPI numbers, please see CPI Year-Over-Year Drops a Bit, But Is it Believable?
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