As oil continues its meteoric ascension, analysts are wailing about the perils of peak oil and crippling inflation. But there’s another worrying trend, says Deutsche bank: Withheld tax receipts. These are a proxy for personal consumption and employment, and when they decelerate, it usually means trouble:
Tax receipts began the year at a solid 7.2% y/y pace, only to decelerate sharply through mid-February, when they slowed to 0.9% y/y. Unexpectedly, they reaccelerated, but by mid-April again began to slow; and as of May 20th they slipped below the previous low and now stand at 0.7% y/y. We draw attention to the year-to-date trajectory because it is strikingly similar to what occurred during the recession of 2001.
The bottom line is this: When tax receipt growth slipped below its current level in the last recession, it continued to slide into negative territory. If tax receipts begin to contract, this will be a strong negative signal for consumer spending, which is one of our biggest concerns in terms of risks to the economy.