We are in the midst of a deceleration in the economy, and the chain of dominoes leading to a recession has started to fall. First, it was a weak global economy. Then, multinationals and business-to-business companies were hit by the resulting decline in global trade and commodity prices. Now, consumers are starting to feel the repercussions as they draw down their growth in spending on discretionary goods and services, which we saw reflected in the first-quarter GDP report.
This is the foreshadowing of a recession. We saw similar indicators prior to recessions in 2001 and 2008. Although there is potential for economic indicators to flip, the current momentum and indicators suggest that the U.S. economy will get worse before it gets better. But we now we have a sense of what the black swan will be for the economy: the weak consumer.
Friday's retail numbers are very significant in telling us just how weak the consumer will be in the second quarter. It is the first critical pit stop on the road to either economic recovery or recession and gives us our first taste for where Q2 GDP will land. Consumers have been propping up the economy over the last two quarters, and as the first month of Q2, this number is the first indicator we'll have into the trajectory of consumer sentiment, and whether deceleration has continued. If the numbers fall below expectations, this will require a huge rebound over the next two months in order to move in the direction of economic acceleration in Q3. If numbers are good, this will be the first good sign that the consumer — and the economy — are making a comeback....
Average weekly earnings for nonsupervisory employees are only 1.3 percent above year-ago levels and slowing. Wage inflation has lost a full percentage point since the beginning of year, bringing us to the lowest rate of wage growth recorded since 2009, when we were bottoming out from recession
2--Eighty-three percent of U.S. CFOs said they believe Hillary Clinton will become the next president of the United States, ...
according to the latest CNBC Global CFO Council survey, conducted between April 29 and May 11.
The CNBC Global CFO Council represents some of the largest public and private companies in the world, collectively managing nearly $4 trillion in market capitalization across a wide variety of sectors — the U.S. companies on the list have a combined market cap of more than $2 trillion....
For the second quarter in a row, the majority of U.S. CFO Council members said that corporate tax reform is the most important political issue to their firms — jumping several points to nearly 50 percent of all respondents.
This quarter, however, income inequality surpassed monetary policy to become the second most-cited "most important" issue. This suggests growing concern over the financial health of consumers among U.S. chief financial officers. Further evidence: Half of U.S. respondents say consumer demand is the biggest external risk factor facing their business. ....
A downgrade for the U.S.
Overall, respondents foreign and domestic have become more bearish about the global economy, lowering their outlook for Japan, Latin America (ex-Brazil), and the United States. When averaging all of the CFO Council members' responses on various current economic situations across the globe, the United States was "downgraded" this quarter from "improving" to "stable."
Santelli: "Negative rates make everything with a positive rate look good" (pushing more investors into 10s and 30s)
On Wednesday, Macy’s reported the worst quarterly sales since recession. On Thursday, Nordstrom did the same. Same store sales fell at Nordstrom for the first time since 2009. Kohls posted an 87% drop in profit and an unexpected decline in sales.
Record Japanese stimulus coupled with negative rates yield produced no inflation, a flat stock market, a strengthening Yen, falling exports, and a slowdown in bank lending.
Running Out of Road
Bloomberg reports Never Has BOJ Done So Much for So Little Benefit.
Even after arranging a record stimulus program and reducing a key interest rate to less than zero, the central bank has failed to boost inflation to its goal of 2 percent. Stocks are little changed from where they were in October 2014 when Governor Haruhiko Kuroda expanded his package of asset purchases. Exports are declining. One measure of bank lending is at a 14-year high, though loan growth is slowing compared with a year ago. While most sovereign bond yields have turned negative, corporate borrowing costs are lagging behind