Bloomberg reported today that “Consumer Sentiment Plunged to Three-Decade Low.”

That sent me scurrying to find some charts, and I ended up liking the two from UBS strategist Andy Lees, at bottom.

The first one is an overlay the University of Michigan consumer confidence index vs the Conference Board’s data. The second chart shows the long term history of the Conference Board data. At an implied level of 43.37 we would be in recession now; not only that but a deep recession.

As the charts show, the ABC index has diverged from the Conference Board data for some time now.

The correlation between consumer confidence and recession might not hold this time — although that would be the first split for 40 plus years.

There is also an implication from this data series that we are already in recession. Given yesterday’s data showing both imports and exports falling, we may have an implied Q2 GDP revised lower by 0.8% to 0.5% annualized growth — putting Q2 into the negative category.

Hence, it is not unfeasible that we could be the verge of recession.


click for larger charts

Category: Data Analysis, Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

39 Responses to “Are We Already in Recession?”

  1. jlj says:

    The idea makes a good rational loop. In a consumer driven economy, if no one is getting jobs/ incomes are not increasing how does GDP grow? Some pent up demand, the rich buying more, more cc debt more exports v imports, $$ from market gains? Cannot last for long, technical recession may be here. Micro depressions for those 15% out of work have been here for a while.

  2. robert d says:

    BR: you live by the charts, you die by the charts. Everyone is looking at the same charts. So what else is new?

    The last time I commented you mentioned various S and P point that had to be held if the market were to stay in bull mode.
    But so did every other technical analyst know that it was 1230, 1170, 1150, 1130 and the rest. the charts did not hold up,
    nor did this silly advice.

    Please bring some value added to them….like the economy, investor psychology (everyone leaning one way), the mob, the herd, the summer—-earnings peaks, the political atmosphere and the like.

    Charting works sometimes. Just not this time.


    BR: My firm is called FUSION because we use different inputs, NOT JUST CHARTS. If the many many datapoints discussed around here werent a clue, I am not (nor have I ever claimed to be) a pure technician;
    2. I don’t know what you are referencing, how about a URL please?
    3. Are you saying this is or is not a recession/ I have no clue as to your intent

  3. Molesworth says:

    Lakshman Achuthan at ECRI has been banging that drum for months now. They’ve been forecasting ‘global economic slowdown’ through the end of the year and ‘double dip’ talk during the summer. I just get their cheap seats newsletter, the one released well after the high dollar paying folks get their heads up. They are saying no recession yet…but econ vulnerable to shocks, so recession a growing danger.

  4. gato.chan says:


    I’m confused by the top chart which shows the white Consumer Sentiment line above the 2008/2009 lows. How can it be said that it’s at a 30 year low when it is higher than 2 years ago?

    Reading your previous posts I believe you (could have been someone in the Think Tank) stated that the ~15% drop from the highs were the market pricing in an average recession but not a large recession. If the CS numbers look to be pointing to a large recession are you still planning on scaling into more long positions?



    BR: The top chart shows one sentiment report leading the other — the big drop in the white line presages a drop in the yellow

  5. AHodge says:

    trying to reason everything from recession/no recession is pointless- too black and white
    you have a perfectly good NBER def and we are not in it.BUT
    1 we are in a subpar growth recession which early fed studies have tried to define–since 1Q2010
    2 we are in recessions only 14% of the time, too restrictive?
    3 it pretty much requires not only zero payroll but a MINUS 1/2% not annual decline over 6 mo, and big minuses in IP for example
    4 recovery only applies to direction not level. one month up starts an economists recovery
    5 so its different from HARD TIMES which we clearly still in with a 9.5% (narrow) unemployent rate. Good times will resume much later and closer to an economists peak and last well into the next recession

    other bogies, like stock market (last 2 months excl) and profits have massive recovery. yeah i know i know.

  6. AHodge says:

    mich sentiment a good secondary indicator for consumer-income the key
    sentiment worst ever incl the 2008 meltdown quite remarkeable
    but it was polled last week at the crescendo of the R created panic.
    its a great R strategy
    run on jobs in 2010 win a blocking mjority in house
    do your best to tank jobs
    tell the pres to F off and then attack his lack of leadership.

    with a growth recession or what ever into 2012 and a really dull electorate
    it may work. they didnt get here they are by overestimating the intelligence of the base

  7. louis says:

    What?? I’m shocked, I thought they said it was over?

  8. FS says:

    If we were in a recession wouldn’t crude oil have dropped more? Copper? Is this the result of QE, or that consumer data can’t be used as a single source for recession predictor?

  9. AHodge says:

    you could argue
    i would
    that except for 3Qs starting 3Q2009 we have been in growth recession or recession for 5 years since mid 2006.

  10. Confidential Wal-Mart Memo Discloses Substantial Drop In Store Traffic Compared To Year Ago

    Visits to Wal-Mart Stores Inc. (WMT)’s U.S. locations open at least a year dropped 2.6 percent from February through June, according to an internal memo, while rivals are attracting customers.

    Those Wal-Mart stores had 82.8 million fewer visits through the first five months of the company’s fiscal year than a year earlier, says the memo, which was obtained by Bloomberg News. Wal-Mart doesn’t disclose those traffic numbers, and David Tovar, a spokesman, declined to comment on the memo.

    Wal-Mart’s plan to recapture customers by returning thousands of products to U.S. store shelves has failed to reverse a decline in foot traffic at the world’s largest retailer, said Jeff Stinson, an analyst at Cleveland Research Co. That’s primarily because Wal-Mart’s core low-income customers are shopping less and going to other retailers more often, according to two recent shopper surveys.

    “The biggest issue remains weak store traffic,” Stinson wrote in a July 14 report. “We believe sales have slowed in the second quarter and are running below plan primarily due to further traffic declines.” The Cleveland-based analyst rates the shares “neutral.”

    Wal-Mart, led by Chief Executive Officer Mike Duke, is restoring an average of 8,500 products to its stores to lure back shoppers still pinched by persistent unemployment and gas prices that have risen 36 percent in the past year. Sales in U.S. Wal-Mart stores open at least 12 months have declined for eight straight quarters.

    Wal-Mart’s traffic decline comes as some of its direct competitors are getting more visits.

  11. ironman says:

    It’s not a recession (in official terms) – it’s best thought of as being a microrecession, where economic conditions aren’t good, but the NBER doesn’t yet think it’s bad enough to make it an official recession.

  12. royrogers says:

    no recession ??!!!

    Then the food stamps / chart/graph should be going down instead of going up.

  13. VennData says:

    Retail sales rise, countering recession fears in stock market.

    Salient facts: 70% of the economy (consumer’s actual behavior) is growing solidly corporare earnings are growing (revenues and profits are beating estimates,) pump prices about to drop, and the gov’t just raised the debt ceiling 2T.

    Same summer slow down as last year… Hedge fund redemptions do not slow the economy.

  14. NMR says:

    Oh boy, we’re now basing recession measurement on consumer confidence indexes.


    BR: No, we are looking at historical data and drawing analogies; not quite the same

  15. wally says:

    I think that projections by economists are a great lagging indicator of recessions. They are now all revising their growth forecasts down and are removing all the “2nd half growth” references… so we are probably already there.

  16. AHodge says:

    yes roy my cat food indicator has the same trend
    Fancy Feast for everyone???

  17. Boots or Hearts says:

    It would seem that A buy the dip mentality is more prevalent which is in contrast to earlier corrections off the lows where Nearly every post I would come across was referencing the apocalypse.

    So, perhaps we correct another 10% after a more meaningful bounce, in hindsight it will have been obvious.
    I believe earnings est. will be ratcheted down as has been suggested.

    Off topic:

    Recently looked at potential properties in a nice part of north Phoenix (Scottsdale)
    Had some lengthy talks with a friend who owns several cash flow + rentals in greater PHX.

    The veritable moratorium on foreclosures has left the area with a glut of high end squatters if you will.
    In some cases, folks who are preforclosure or in default simply list the home at a price it will never sell for, then sit tight in silent protest.

    The logjam of houses in the area which are REO/in foreclosure limbo (homeowners not paying, but not being foreclosed upon) is bound to be released, but even still the population in question is hoping to be able to stall long enough to get debt forgiveness ( the lenders to write down a good chunk of the original debt)

    A game of chicken

    While I was there my friend went to try and pick up a home coming to auction, but it ended up going back into the red tape pipeline and never made it through. Anyone who thinks this will work itself through quickly has never had a peek into the inner workings of this mess.

    My impression is that right now supply is artificially tighter, but that if the foreclosure spigot is turned back on reality will set back in.

  18. machinehead says:

    Why are commenters talking about ‘no NBER recession’? The NBER never diagnoses a recession until it’s well underway, and sometimes not until it’s almost over.

    One MUST use contemporaneous data to forecast recession in real time, because the NBER is never going to chime in until way after the fact.

    Besides the charts that BR posted, the ISM manufacturing index took an appalling hit this month. Also, the yield curve is flattening. We’re getting consistent negative messages from multiple independent sources.

    I put the probability that we’re in recession at 60 percent. The glass is four-tenths full!

  19. Today’s prelim Mich figure is the lowest since April 1980, but folks should note this is “prelim” until the final in two weeks. For the first time since Aug-2010 the TRENDLines Recession Indicator is signalling a contraction alert. Adding in economics releases for the past week, TRI is projecting a -1.7% GDP trough in April 2012 … en route to a mere 1.1% GDP by its 2013Q3 horizon.

    While there is much time for mitigation, Canada is not so lucky. The Canadian TRI infers its economy entered a contraction two weeks ago due to its $95,000 housing bubble, export killing par-plus Loonie & cumulative high petroleum costs.

    TRI-USA chart:

    TRI-Canada chart:

  20. Zenster says:

    I’m not an economist but I have had enough courses to recognize those with an independent streak that isn’t swayed by MSM. I read John Hussman’s commentary weekly. He most recently wrote: “…the ISM reported Monday that its Purchasing Managers Index dropped unexpectedly to 50.9, the slowest pace in two years. That report, coupled with an early slide in the S&P 500, completed the remaining holdouts (conditions 2 and 3) of the Composite[Recession Warning Composite, . Coupled with the slowdown in year-over-year GDP growth, the composite of economic and financial evidence we presently observe has always and only been associated with ongoing or immediately impending recessions. This is not an opinion or a viewpoint, but a fact of the data. “Always and only” is the Bayesian equivalent of “certainty”…

  21. Zenster says:

    I’m not an economist but I have had enough courses to recognize those with an independent streak that isn’t swayed by MSM. I read John Hussman’s commentary weekly. He most recently wrote: “…the ISM reported Monday that its Purchasing Managers Index dropped unexpectedly to 50.9, the slowest pace in two years. That report, coupled with an early slide in the S&P 500, completed the remaining holdouts (conditions 2 and 3) of the Composite[Recession Warning Composite, Coupled with the slowdown in year-over-year GDP growth, the composite of economic and financial evidence we presently observe has always and only been associated with ongoing or immediately impending recessions. This is not an opinion or a viewpoint, but a fact of the data. “Always and only” is the Bayesian equivalent of “certainty”…

  22. mathman says:

    You can call it whichever way floats your boat but for an awful lot of people it’s:

    a) not comfortable or “easy” any more

    b) what used to be ‘paycheck to paycheck’ is now one crisis away from financial ruin, meaning most people can’t take a $1000 hit
    [see here:
    1) we can’t fix the roof or the car
    2) i can’t get the cap on my back molar that’s rotting away
    3) i need a third job

    c) it’s painfully clear that politics is not helping and neither is Wall Street, the financial industry, the energy sector, or war

    d) it doesn’t look like anything has been fixed that was the cause of the condition we’re in

    e) whether anybody wants to pay attention to it or not – the environment isn’t getting any better either and the weather is becoming more extreme each year. Maybe we should at least THINK about this and try to connect the dots instead of doing the same thing each year and hoping it gets better.

    Have a nice night, all.

  23. Sechel says:

    Fox Business news had an analyst saying it’s very important that the equity really continue or else we’d have a recession. Earlier another analyst on the same network said he’s not buying treasuries because they fail his credit analysis so he buys munis instead.. We need some intelligent economic coverage on TV. MSNBC and CNN are no better….

  24. Machinehead, real time charting of the Great Recession was indeed available. In fact, leading indicators presently allow 8-Qtr horizons … subject of course to mitigation via fiscal/monetary policy.

    Back on Nov 26 2008, my TRENDLines Recession Indicator warned of Q4 GDP approaching -8% whilst BEA was only just announcing 0.5% GDP for 2008Q3 (later revised to -3.7%). Non-TRENDLiners had to wait a long thirteen weeks to hear the harsh reality from BEA, bank economists & the media pundits. They were told it was -3.8%; and only on July 29 2011 did BEA finally declare it to be -8.9% … 32 months after our chart was posted on the Web! Similarly, it won’t be possible to compare today’s TRI inferred 2011Q3 GDP estimate of 1.3% to BEA figures for thirteen weeks (late October). Q4 is forecast at 1.1% presently (links upthread).

  25. Zenster says:

    Sorry about double posting. Didn’t realize how long it took for comment to appear.

  26. Sorry, here are the correct links to TRI:

    Click on desired chart

  27. machinehead says:

    Freddy Hutter –

    Two days after your Nov 26, 2008 forecast of deeply negative Q4 GDP, the NBER identified that a recession had begun in December 2007:

    The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007.

    Because the NBER is so dilatory in announcing recessions — and also because bull markets often begin before a recession ends — NBER’s official announcement of recession historically has been a decent buy signal.

    For example, the S&P closed at 896 on Nov 28, 2008. Anyone who bought that day had a profit by May 2009, and remains profitable today.

  28. 4whatitsworth says:

    I just don’t see a recession. My business (Software) is better than it’s been in years and our customers and the people I speak with are also doing fairly well. There is a lot of liquidity and no one in the business world seems to be short on cash in addition skilled people seems to find jobs. On the down side unemployment is still high but not rising there are currently not enough construction jobs however it is still hard to find a good handyman.

    Full disclosure: I did not see my portfolio falling off a cliff in two weeks either. For now my money is on a slow steady recovery unless the government finds a screw it up. Also, I bought this week.

  29. MacroEconomist says:


    With all due respect to those of you in Software, Manufacturing or real industries, you don’t count. With all due respect to anybody making less than 100k, you don’t count either. 10% of the population has driven 90% of the spending. This 10% lives and dies by asset bubbles. You just saw several trillion of net worth destroyed. As it is, the numbers were already soft.


    As BR knows, we are a FINANCE economy. The biggest growth sector in America is the hedge fund business. The Bernank told you in September he was gonna race up stock prices and make you rich so you spend more. Now that stock prices have fallen, what will the top 10% do? And if the top 10% cuts back, then it probably means we fall more.

    And hence the vicious cycle starts. Think 1995-2000 in reverse.

  30. Joe Friday says:

    10 Housing Markets That Will Collapse This Year

    (Miami & Vegas ? When did they un-collapse ?)

  31. rktbrkr says:

    Re 10 housing markets
    All the usual suspects except Bethesda MD (guess a lot of consultant contracts are expiring), So FL, inland CA and Vegas.

    There appears to be a slight parting of the ways in the sand states with the working class areas faring worse than the more upscale areas nearer the water (wealthy Spanish speaking ferriners don’t want to live non-wealthy Spanish speaking neighborhoods). This forecast doesn’t see a bottom til 2013. The depth of the upcoming recession and the pace at which banks finally unload their legally encumbered foreclosures will dictate the size of the selling climax.

  32. robert d says:

    BR: I was not talking about your firm because you, Barry, wrote the various pieces on TBP about technical support levels. Yes, you wear multiple hats in your business but this blog on the masthead, at least, makes no mention of Fusion IQ.

    I have no URL as I am just an ordinary investor who has been in the market since 1973 when I joined Mother Merrill. But I have commented many times on TBP, the last time was about a month ago when there was questioning, as there always is, as to whether the market would hit the expectations of almost every market strategist that it would hit 1400 by year end 2011. And you produced charts showing very strong support at 1320, 1270, 1230 when the market was north of 1330, if I remember correctly.

    There was little or no discussion of a collapse as we have now seen. [BR: Really? You must have missed this: Ritholtz Hedges His Bets June 2011]

    You may remember that I mentioned one stock, Sodastream, a freakin’ joke of a company……look what happened to it last week. One had to visit Williams-Sonoma or Bloomingdale’s to see the dusty cartons containing these machines hidden behind the espresso machines.

    In answer to your third question, no I do not think we will be in a recession (and who cares what the macro conditions are) . I believe the money center banks are a screaming BUY….(remember me when you think back to the good old days when you could buy all the XLF you wanted at 12.75.

    There is just too much noise from and about Washington. Like the guy from Omaha I believe we live in a wonderful country full of entrepreneurs like yourself Barry who work hard, play honestly, and believe in capitalism. We will do just fine —one person at a time. Time to stop complaining and playing the blame game, get back to work and forget about the hocuspocus of technical research. As you know, investing is an art, not a science.

  33. AHodge says:


    business cycles are are for numbers geeks
    clearly you not
    the good reason you dont hear until later on recession start
    is you and NBER need a trend of 6 mo
    you going to call every 1- 2 month downwiggle a recession?
    and the # get revised
    but if you dont have payrolls and IP and the other two pieces they use
    namely real incomes and something called manufacturing and trade sales–its a goods purchase #
    moving down you really dont have even a shot–yet you need them all or rolled up into their coincident indicator–the Coincident Indicator
    so there you are score the next peak before they do

  34. AHodge says:

    and as noted earlier it aint now
    also as noted we have hard times an economy that sucks.

  35. [...] Ritholtz at the Big Picture asks Are We Already in Recession? Bloomberg reported today that “Consumer Sentiment Plunged to Three-Decade [...]

  36. [...] we already in recession?  (Big Picture, [...]

  37. steve says:

    I don’t know who’s blog robert d is reading and I’m impressed BR is replying. Anyway, BR posted a reference to an H & S post – not to widely repeated. One that pointed to a 1130 zone that’s still held up for now. That is until a recession (that’s not fully priced in) becomes clearer (whether it pans out). This is one more piece in the puzzle.