Gary Shilling has a new column up at Bloomberg View, explaining why he still thinks a recession is coming.What’s great about it is that, forecast aside, he has a very clear-eyed assessment of the state of the economy, featuring all the bullish data points and bearish data points.
The key to his argument is that consumers are getting by on mediocre income growth, and that retrenchment is inevitable, though he acknowledges we haven’t seen it so far, and that even high gasoline prices haven’t been a problem.
Anyway, we summarize his key thoughts:
- Consumer spending does remain strong. Growth of 0.8 per cent in February was the best number in 7 months.
- Retail sales and consumer confidence have also been strong.
- But the numbers can’t last. Personal income growth was just 0.2 per cent in February.
- Thanks to college tuition and the car market, consumer debt is growing again.
- The housing market is still miserable.
- State and local spending is still depressed.
- There’s still plenty of excess capacity, restraining business investment.
- It all comes down to the consumer: Due to weak wage growth a retrenchment is inevitable, and that’s what will cause the recession.
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