Monitor <
allpaidmonitor@gmail.com> writes:
Consumer Confidence Index Drops, Lowest Since 2021.
Subject: Are We Going into Recession?
Probably, though it's hard to guess whether official government
statistics will report two consecutive quarters of falling GDP (which is generally regarded as the definition of a recession).
Here's the problem: As inflation ramps up, those who can't afford the
higher prices will buy less, but those who can will buy *more* (non-perishables), to save money by stocking up in advance to save
compared to even higher prices later. That increase in demand will help support the higher prices. As a result, we'll initially get reports
that "consumer spending is holding up despite higher inflation".
However, once "stocking up" is mostly done, and/or if inflation comes
down, the extra "buy now before it gets even more expensive" demand will
cease and GDP will drop.
As this burst of inflation was getting started some months ago, lumber
futures went from 600 to 1500, but are now back down to the 600s.
Gasoline futures prices (RBOB) have dropped from ~$4.65 not so long ago
to $3.67 as of Friday. Gasoline at the pump has been dropping, too.
I'm not sure about diesel fuel prices (used by trucks that deliver many
of the goods to stores), but it's probably come down some, too. If and
when those reductions show up in shelf prices in the stores (and they
usually do, at least for groceries), future inflation expectations will
come down, which will reduce that "buy now" demand surge. In fact,
anyone that's already stocked up can then buy less than their average,
using up inventory. So, in the short term, if diesel fuel prices drop
allowing pass-through savings in shelf prices, then I think there's a
good chance the result will be a drop in GDP. The result is that even
though the economic situation is improving (inflation dropping or even deflation for a while), a second quarter of lower GDP would indicate a recession, causing people to spend less / save more, which would also contribute to causing a recession.
Of course, natural disasters, disease threats, wars, etc. can also cause
buying surges. Stocking up for those could counter the recessionary
outlook.
Just my uninformed opinion,
-WBE
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