Key Warning Signals for a Recession
The current economic indicators in the USA show several warning signals that point to a possible imminent recession. Particularly in the German-speaking world, these developments are closely monitored by investors and analysts.
Inverted Yield Curve
- Description: The yield curve has been inverted for months – meaning that short-term interest rates are higher than long-term rates.
- Significance: This configuration is considered one of the most reliable leading indicators of an economic downturn. In the past, it typically appeared several months before a recession.
- Implications: Investors and economists interpret the inversion of the curve as a serious warning signal. It indicates that markets expect declining interest rates in the medium term to cushion an economic downturn.
Changes in the Labor Market
- Unemployment Rate: While the official unemployment rate remains low, the picture is misleading.
- Job Quality: Many highly qualified specialists currently find themselves in poorly paid service jobs (e.g., delivery services or retail). This deteriorates the quality of the labor market and distorts the perception of stability.
- Initial Claims for Unemployment Benefits: Higher initial claims, along with declining employment growth, are classic signs of a budding weakness phase.
Consumer Behavior and Spending
- Stagnating Expenditures: Consumer spending is increasingly stagnating; credit card data has shown a reduction in spending since the end of April.
- Retail Sales: In April, sales rose by only 0.1 percent compared to 1.7 percent in the previous month – a significant decline in growth.
- Loss of Purchasing Power Due to Tariffs: The fear of higher prices from new US tariffs initially led to a shopping spree, but this is now subsiding and additionally burdening the economy.
Other Relevant Factors
Trade Wars and Protectionism: The trade conflicts initiated by Trump increase uncertainties in international trade and may further dampen economic growth.
Inflation: Persistent inflation creates uncertainty for businesses as well as consumers and could lead to further consumption restrictions.
Summary
The key indicators for a possible recession in the USA currently include:
| Indicator | Current Development | Significance |
|---|---|---|
| Yield Curve | Inverted | Leading indicator for downturn |
| Labor Market | Low rate, but weak jobs | Misleading stability |
| Initial Claims for Unemployment Benefits | Rising | Sign of weakness |
| Consumption/Spending | Stagnating/declining | Weakening domestic demand |
| Trade Wars/Tariffs | Tightening | Burden on growth |
These developments should be closely watched by investors from the German-speaking world as they may have significant effects on global markets.