Wall Street just found another recession signal

For the third straight quarter real business investment has declined in the United States, Credit Suisse pointed out in a note to clients on Tuesday, and there’s reason to believe that there may be something going on here beyond just record low prices for commodities and oil.

Here’s the long and short of it: The last time the US experienced three straight quarters of declining business investment without being accompanied by a recession was back in 1986-1987. You’ll recall that that was the midst of an oil price rout like the one we’re seeing now.

So maybe we’re good. After all, most of the decline in business investment was experienced in mining, energy and other sectors associated with those industries, like “Other Trucks,” “Trains,” and “Mining Machinery.” Also, a drop in commodity prices has weighed on business investment in the agricultural sector.

Of course, that isn’t to say these sectors don’t matter. They have a big impact on the economy.

“Indeed, parts of the investment data that directly measure energy and mining investment have fallen precipitously since late 2014 — and not just in the United States,” said the Credit Suisse note.

“For example, a subcategory called “mining structures investment” has dropped from roughly $160bn to $50bn, taking $110bn directly off the levels of investment and GDP. The current level of nominal business investment would be almost 5% higher if that decline had not occurred.”

But wait, there’s more

Additionally, Credit Suisse notes worriedly, there have been smaller declines in investment in sectors across the board.

This decline has taken place even though conditions for corporations to borrow money have been incredibly favourable, so that’s not really a factor here. Most corporations see their profits declining in the second half of 2016, though, and that very may well be.

Plus there’s that sticky US election coming up.

“In the very near term, the outlook is so muddled by political and global factors that it is hard to expect a major rebound,” Credit Suisse noted. “Firms delay investments during periods of high uncertainty because there is option value in waiting for clarity. We wonder whether getting past key events such as the election could ultimately appear to trigger a rebound.”

Then again, maybe this is just 1986-1987 again. One to think about.

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