Oil Prices Confirming ECRI Recession Call
by: Lance Roberts November 9, 2011
As goes oil, so goes the economy. Today we posted an update as to why oil price spikes hurt even more when disposable incomes are already under pressure, as it acts as an additional tax on the consumer. Of course, this additional tax on a consumer that is already receiving more than 23% of his income from government transfers, real personal incomes on the decline and food and energy absorbing more than 22% of wages and salaries doesn’t bode well for increases in real consumption that supports healthy organic economic growth.
The reason that I bring this up is that yesterday we posted the CNBC interview with Lakshman Achuthan, who was reiterating his point that a recession is still coming despite the recent uptick in the GDP data. It is an embarrassing display for the commentators on CNBC, who just cannot, as Lakshman put it, “see the forest for the trees.” While the media focuses on what has already occurred, looking at reports such as GDP, Lakshman talks about the pervasive decline, a “contagion” in the forward-looking indicators. He states that the recent data upticks have done nothing to reverse the recessionary call that the ECRI has made due to what the leading indicators are telling them.