Forget About Oil, Declining Tax Receipts Screaming "Recession"

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.

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