“What we’re seeing is this slide towards recession happening across the economy,” Breitbart Economics Editor John Carney said in an interview Wednesday on Larry Kudlow’s eponymously named Fox Business show.
Carney explained that the latest economic data—from the crashing Empire State manufacturing survey to the disappointing holiday retail sales numbers and the weaker-than-expected producer price index—all point in the direction of a recession sooner rather than later.
The first “hint” of what lies ahead came from Monday’s manufacturing survey from the New York Fed, Carney said. “That thing fell off a cliff. It was much worse than anyone thought. It went from a negative [11.2] to a negative [32.9]. So, this thing was a wreck. It’s telling us that the industrial production numbers we’re looking at for December are probably getting worse in January right now.”
“And you can see it all throughout the economy,” Carney added. “In October, retail sales were higher than they were in November, which were higher than they were in December. So, what we’re seeing is this slide towards recession happening across the economy.”
All eyes will be on the Philadelphia Fed’s survey for confirmation of this downward slide, Carney explained.
“What we’re looking for now is confirmation from the Philly Fed survey,” he said. “That’s the most important one. It has the longest history. It best reflects what’s going on around the country. So, if it’s just New York, that might not be recession right away.”
Because of the strong labor market numbers, Carney was initially predicting a recession would come in the second half of the year. However, he said “the numbers today have me worried that it’s coming much faster than we thought.”
As Carney noted in his Wednesday Breitbart Business Digest newsletter:
What looked like hopeful economic data a week ago now looks like an augury of a faster-than-expected economic collapse. The combination of the stronger-than-expected jobs figure and the weaker than expected consumer inflation figure had many reviving the possibility of a “soft landing” for the economy—Wall Street lingo for exiting the period of high inflation without a serious economic slump. Not any more. The retail sales figure is only the latest grim economic data received this week.
The producer price index for final demand fell by 0.5 percent, indicating a big decline in consumer demand. The index for intermediate demand, basically business-to-business sales, fell by 2.9 percent. Industrial production dropped 0.7 percent, much worse than the 0.1 percent forecast. Manufacturing output for December dropped 1.3 percent, and November’s 0.6 percent fall was revised to a 1.1 percent decline. Yesterday’s Empire State Manufacturing indicated a plunge in both output and forward-looking demand signals.
The expansion ain’t over until it’s over. But this week’s data suggest the recession may not be as far off as it looked a week ago.
Kudlow asked what the Federal Reserve should do in response to the economic data. Carney cautioned that the Fed should not back away from its hawkish inflation fight.
“I think the Fed really should not look at these numbers and decide that inflation is defeated,” he said. “We have had a couple months—two months now—of soft inflation numbers. That’s happened in the past, and then you get inflation coming right back if the Fed looks like it’s going to step back.”
This is a warning Carney has consistently sounded in the Breitbart Business Digest. In response to Wall Street’s overly optimistic economic forecasts, Federal Reserve Chair Jerome Powell has been sending hawkish signals to the market that the Fed does not intend to backdown from its commitment to fight inflation.
“Fed officials have taken to being more explicit about the economic, social, and political headwinds they expect to face and overcome in their crusade against inflation,” Carney noted last week.
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