Despite outward appearances of economic stability with historically low unemployment rates, robust GDP growth, and strong consumer spending, subtle signals of an impending recession are surfacing in the United States. Citi’s chief U.S. economist highlights concerning indicators, pointing towards a potential recession by mid-2024.
One noteworthy aspect is the uncharacteristic silence of this recession, which has quietly manifested in various sectors. Credit card and auto loan delinquencies are on the rise, particularly among younger and lower-income households, signaling increased financial stress. Wells Fargo reportedly underwent another round of layoffs, reflecting ongoing challenges in the financial sector.
Additionally, the price of lithium, a critical component for electric vehicles (EVs), has plummeted to mid-2021 levels, down over 80% from its peak. Lackluster demand for EVs in the U.S. contributes to this decline, emphasizing a broader economic impact.
Furthermore, U.S. regulators, particularly the Federal Reserve’s chief bank watchdog, are intensifying scrutiny on commercial real estate loans amid new financial strains on lenders. Concerns loom over a potential default risk as about $1.5 trillion in commercial mortgage debt is due by the end of 2025, compounded by steeper borrowing costs and declining property values influenced by remote work trends.
The Federal Reserve’s decision to raise interest rates to the highest level since 2001 in response to inflation adds complexity to the economic landscape. Policymakers signal that rates may remain elevated until they are confident inflation returns to the 2% target. With small and regional banks holding 80% of the $20 trillion commercial real estate market’s outstanding debt, there are apprehensions that lending standards could tighten significantly.
In summary, while surface-level economic indicators suggest strength, a closer look reveals vulnerabilities, including declines in full-time employment, reduced hours worked, and a hiring freeze in specific sectors. These subtle signs, coupled with economic challenges in various domains, warrant a cautious outlook for the U.S. economy in the coming months.
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“Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels,” Wilbert van der Klaauw, economic research advisor at the New York Fed, has said. “This signals increased financial stress, especially among younger and lower-income households.”
— unusual_whales (@unusual_whales) February 20, 2024
Wells Fargo reportedly had another round of layoffs this morning, per employees
— MacroEdge (@MacroEdgeRes) February 20, 2024
The price of Lithium is back to mid-2021 levels, down over 80% from its peak. pic.twitter.com/pHFEqsJ3cS
— Charlie Bilello (@charliebilello) February 20, 2024
finance.yahoo.com/news/no-soft-landing-us-economy-022146984.html
Same story with Natural Gas, the disinflationary pressures aren't over yet: pic.twitter.com/gyLVpDt3nd
— Phoenix Capital (@PhoenixCapitalH) February 20, 2024
The drop in the price of lithium has been staggering, and you can see the direct effect of that on Albemarle Stock Price.
It is also not helping that the demand for EVs in the USA is lackluster, to put it mildly! pic.twitter.com/U6GVYXr4TO
— The Quant Guy (@Andrea_Texas_82) February 20, 2024
www.bnnbloomberg.ca/fed-s-barr-says-regulators-are-eyeing-commercial-real-estate-risk-1.2035846
finance.yahoo.com/news/commercial-real-estate-trouble-could-171617004.html
CRE Valuations Dropped 42 Percent on Average in 2023 @cred_iq #CMBS t.co/hI48pwWXYm
— Daniel McNamara (@danjmcnamara) February 20, 2024
The current inversion has reached levels comparable to 1929 → Great Depression period
This won’t end well pic.twitter.com/eurW6DTzxu
— Game of Trades (@GameofTrades_) February 18, 2024