- by New Deal democrat
The typical post-jobs report lull in the data is amplified this month (of course) by the fact that there was no jobs report this month! If there is a tiny silver lining beginning to appear, it is that the Administration is making noises about reinstating the health care subsidies that has been the key “ask” by Congressional Democrats. We’ll see.
One important data point that came out last week that I didn’t report on was vehicle sales. To recap, after housing, vehicle sales are typically the next sector to roll over before a recession begins. And within those sales, heavy truck sales typically roll over first and most decisively vs. car and light truck sales, which fade later and are much noisier.
The update last week, for August, indicated a very sharp -5.2% decline in heavy truck sales for the month, bringing the total decline from their April 2023 peak to -27.4%. Here’s what the entire historical trend looks like:
Typically any sustained decline of -10% from peak has been enough to signal a near term recession is more likely than not, so this is a very serious number.
When on a YoY% basis, both housing under construction (blue in the graph below) as well as heavy truck sales (red) are off more than -10%, with no false positives and only one (non-pandemic) false negative, in 2000 (note graph adds 10% to both values so that is shows at the 0 line):
The above recession indicator has been triggered for the last two months.
But no recession indicator is perfect, and two other components are missing from this picture.
First, as per above, car and light weight truck sales have also always rolled over before the onset of recessions, although they are much noisier. Thus the below pre-pandemic YoY graph shows monthly sales in light blue, and the quarterly average in dark blue:
There are plenty of false positives here, but no false negatives. Which is important when we look at the post-pandemic graph:
The latest three month average of car and light truck sales is higher by 4% YoY. This is simply not recessionary.
Also, the “third leg of the stool” in leading durable goods is the wider manufacturers’ new orders component, which I reported on last week. To reiterate, here is the pre-pandemic historical record:
While these did roll over well in advance of the 2001 recession, they were still weakly positive going in to the 2008 recession.
Here is the post-pandemic look:
As per my report last week, these are up roughly 5% YoY through August.
In short, while housing and trucking are plainly recessionary, the broader manufacturing orders outlook and consumer purchases of vehicles are not.
