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U.S. Economy Tip Toeing on Edge of Recession, Retail Sales and Housing Starts Data Show!

By Glenford S. Robinson

On Wed, October 16, 2019 at 08:30 am, EST, the U.S. Census Bureau, released the Core Retail Sales Report, and the report came in well below forecast, coming in at -0.1% below a forecasted reading of 0.2%, and a previous reading of also 0.2%. We can see here that the economy has not improved, from the last time we spoke, about the Core Retail Sales numbers.

As soon as these numbers became public, the EUR/USD currency pair, spiked upward and continued trending higher throughout the day. Sometimes these moves can be predicted, based on Economic Indicator data. Forex traders and others investors, call this method of predicting market movements, Fundamental Analysis, a method used predominantly by institutional traders, such as investment banks, pension funds, and hedge funds.

The Core Retail Sales Report, measures changes, in the total value of sales, at the retail level, in the U.S., excluding automobiles. The report functions, as a pace indicator for the U.S. economy and an important indicator of consumer spending. This report tells us, that if current numbers, miss forecast and previous readings, then slow U.S. economic growth, would be the outcome, but if current numbers beat forecast, and beat previous readings, then an increase in U.S. economic growth would be the result.

A higher than expected reading of the Core Retail Sales Report, should be perceived as positive for the U.S. economy and bullish for the USD, while a lower than expected reading, should be perceived as negative for the U.S. economy and bearish for the USD.

Let’s see, if the Retail Sales Report fared any better. The Retail Sales Report also produced by the U.S. Census Bureau, measures the change, in the total value of sales, at the retail level, including automobiles. The Report happens to be, the foremost indicator of consumer spending and accounts for the majority of overall economic activity.

A higher than expected reading of the Retail Sales Report, should be perceived, as positive for the U.S. Economy, and bullish for the USD, while a lower than expected reading, should be perceived, as negative for the U.S. Economy and bearish for the USD.

Well, on Wednesday, October 16, 2019 at 8:30 AM, EST, the Retail Sales Report for September, came in well below expectation, again—missing forecast, posting a dismal reading of -0.3%, well below expectation of 0.3%, and not even close to previous readings of 0.6%.

Based on these disappointing U.S. economic numbers, we should expect the Federal Reserve, to cut interest rate again, in October and in November. In fact, it would be surprising, if the Fed does not cut rates, again in the near future. The uncertainty brought on by, the US-China trade war, and the Brexit debacle, strongly justify at least two more interest rate cuts, in the not-so-distant future.

The continued weakness of the U.S. Dollar, has caused the price of gold to rise. The price of Gold increased by 208.13 USD/t oz. or 16.23% since the beginning of 2019, according to trading on a contract, for difference, (CFD) that tracks the benchmark, market for gold. Historically, Gold reached an all-time high of 1920.30 in September of 2011 and a record low of 34.83 in January of 1970.

Gold traders, trade Gold Futures in the Commodity Exchange, (COMEX), which merged with the New York Mercantile exchange, in 1994 and became the division responsible, for metals trading. Metal…I could probably trade, my old kitchen sink, that I ripped out of my kitchen, and kept in my basement, for safe keeping. I would make a few dollars; I am sure.

Jewelry accounts for half, of the gold consumption in the world, (how come, I don’t have any?) investment accounts for 40%, while industries account for the other 10%. Gold functions not only, as a precious metal, but also as a commodity, vital for many industries.

Gold serves as an excellent conductor of electricity, extremely resistant to corrosion, and as one of the most chemically, stable of all the elements, found on the periodic table, making it critically important, in electronics and other high-tech applications.

Don’t be surprised,  one day when you open the back of your cell phone, to remove the battery, and reboot the darn thing,  you immediately see, a piece of gold nugget, hanging out of its backside, whatever you do, don’t touch it, don’t remove it, because if you do, you might just ruin, your $2,000 iPhone, forever.

The US Department of Commerce, and the Bureau of the Census release, the New Residential Construction Report. New Residential Construction provides national and regional data on the number of new housing units authorized by building permits; authorized, but not started; started; under construction; and completed.

The data includes new, privately-owned housing units, excluding “HUD-code” manufactured (mobile) homes. The data came from the Building Permit Survey, and from the Survey of Construction (SOC), and partially funded by the Department of Housing and Urban Development (HUD).

The Housing Starts Report released on Thursday, October 17, 2019 @8:30 AM, EST, measures changes in the number of new constructions underway. The construction industry, stumbles into recessions, first before any other industry, when the economy declines, and recovers first before any other industry, when conditions improve.

A higher than expected, Housing Starts reading, should be perceived as, positive for the U.S. economy and bullish for the USD, while a lower than expected reading, should be perceived as negative for the U.S. economy and bearish for the U.S. dollar. As a result of a slowing economy, the USD began showing increase weakness from October 1st to October 18th, declining in value from 0.9189 USD per 1.0000 EUR to 0.8945 USD per 1.0000 EUR on October 18th, a decrease of roughly 2.7%. Our analysis came from analyzing the EUR/USD currency pair from October 1st to October 18th

Our data showed that the newly released Housing Starts Missed forecast of 1.320 Million, posting a disappointing 1.256 Million, and well below a previous reading of 1.386 Million, constructions underway.

The Housing Starts Report like the Buildings Permit Report, acts as a leading indicator of strength in the housing sector. As a result of such predictive importance of the Housing Starts Report, the construction industry happens to be the first to go into a recession, when the economy declines. Ok, then; so, the fact that the Housing Starts Report, missed forecast, the U.S. economy has in fact plunged into a recession? Am, I right?

According to my fundamental analysis, the U.S. economy already passed the stagflation phase that occurs right after the peak of the business cycle and has now entered the cusp of the recession phase of the cycle. This explains the reason why deflation continues to wreak havoc on the Fed’s plan to raise inflation rates toward the 2% benchmark, where the agency prefers to have it. In fact, the inflation rate currently hangs well below that 2% mark and currently sits at a lowball 1.8%. 

On the global political front, news broke on Tuesday, October 15, 2019 at 10:30 AM, EDT, that the United Kingdom and The European Union agreed to an accord on the UK’s departure from the European Union. However, hopes dashed after the Northern Irish Democratic Unionist Party (DUP), announced that it didn’t support the deal.

Increased volatility of the EUR/USD currency pair followed after these announcements. This announcement saw an increase in upward volatility, while the second announcement, saw an increase, in downward volatility.

The latest IMF World, Economic Outlook projections, pointed out that the Global Economy of 2019 continues to show the slowest growth since the 2008 financial crisis, mainly as a result of the US-China, trade war.

The recently released Building Permit Report (on Thurs, Oct. 17, 2019 @8:30 AM, EST), from the U.S. Census Bureau, reveals that American consumers, have begun buying new homes again, as a result of lower interest rates. The recently released Building Permits Report for September, shows that 1.387 Million Building Permits, were issued to new home builders, beating out a forecast of 1.340 Million Permits, and surpassing a previous release of 1.425 Million. This data tells us, that despite the current struggle, of slow economic growth, the U.S. economy will do much better a few months from now.

The Building Permits Report measures, changes in the number of new Building Permits issued, by the government. Building Permits provides, key information, as to demand in the housing market. The Building Permit plays the role of a leading indicator, which tells the future of what will happen before it does.

In this case, six to nine months from today, the economy should reflect, the positive or negative result of the report. If the report released positive numbers, then six to nine months down the road, new homes will be constructed, which will cause new home buyers, to go out and buy durable goods, such as refrigerators, stoves, and furniture!

However, if the Building Permits Report, releases negative numbers, then there will be no economic activities created, by consumers going out and buying, durable goods items. The current Building Permit Report, released positive numbers. Therefore, six to nine months down the road, the economy should fare much better than it does today, as a result of increased activity, from the buying of new durable goods.

A higher than expected reading of the Building Permits Report, should be perceived, as positive for the U.S. Economy, and bullish for the USD, while a lower than expected reading, should be perceived, as negative for the U.S. Economy, and bearish for the USD.

The Federal Reserve Bank of Philadelphia releases, the Philadelphia Federal Reserve Manufacturing Index, which rates the relative level of general business conditions in Philadelphia. A level above zero on the index indicates improving conditions, while a level below zero, indicates deteriorating conditions. The data is compiled from a survey of about 250 manufacturers in the Philadelphia Federal Reserve district.

A higher than expected reading should perceived as positive for the U.S. economy and bullish for the USD, while a lower than expected reading should be perceived as negative for the U.S. economy and bearish for the USD.

To our surprise the Federal Reserve Bank of Philadelphia Manufacturing Index for October came in well below forecast of 7.3 and a previous reading of 12.0 to a disappointing reading of 5.6. Yet, another economic indicator bearing bad news for the U.S. economy.

If this is not a recession, then I don’t know what is? Can the U.S. economy get any worse than this? Week after week, we continue to get negative economic growth numbers. The GDP hasn’t moved from 2% for the past few months. I know that the classification of a recession is 2 consecutive quarters of negative GDP growth and the classification of a Depression is 8 consecutive quarters of negative GDP growth, but come on!

Let me whisper something into your ear; Do you know who is loving this? The rich people, the people who knows and understand money and investing. They are currently buying up cheap assets in markets that are underperforming. For example, smart money stock market investors are currently buying up high intrinsic values stocks at low prices. Smart money Foreign currency investors, are currently buying up the USD at low, prices to sell it back at higher prices, 6 to 9 months from now, when the U.S. economy picks back up again, when people start buying up durable goods items to put in their newly built homes.

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U.S. Economy Tip Toeing on Edge of Recession, Retail Sales and Housing Starts Show!

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