Ten Signs The Double-Dip Recession Has Begun

From 24/7 WALL STREET:

1. Inflation

There is almost nothing that damages consumer confidence as badly as a rapid rise in prices.  Starbucks recently increased the price of a bag of coffee by 17% because wholesale prices have risen by almost twice that rate in the last year. Cotton prices nearly doubled in 2010 but has fallen this year. But, apparel is made months in advance of when they reach store shelves. Summer clothing prices are up as much as 20%. That may change in the fall, but for the time being, the consumer’s ability to buy even the most basic clothing has been undermined. Consumers today pay more for sugar, meat, and corn-based products as well.

2. Investments have begun to yield less

Part of the recovery was driven by the stock market surge which began when the DJIA bottomed below 7,000 in March 2009. The index has risen above 12,000 and the prices of many stocks have doubled from their lows.  As result, American household nest eggs that were decimated by the collapse of the market have rebounded and enabled people to splurge on themselves. However, the market has stumbled in the last quarter. The DJIA is up only 1% during the last three months and the S&P 500 is down slightly. Americans, though, have have few other places to put their money.. Ten-year Treasuries yield about 3%. Gold was a good investment over the last year, but it has begun to falter as well.  The market may not be a friend to investors for quite some time.

3. The auto industry

The auto industry has staged an impressive comeback, although its profitability is based as much on the layoffs it has made over the last five years as generating new sales. GM and Chrysler have emerged from bankruptcy. Year-over-year monthly sales improved late last year and through April. May sales stalled.  GM’s revenue dropped by 1% compared to May of 2010. Ford’s sales were down about as much.  There are many reasons for this trend including high gas prices and the constrained manufacturing capacity of the Japanese automakers because of the earthquake. Consumers also may be deferring big purchases because they are worried about their economic prospects.  Slow car sales are not just a sign of lagging consumer confidence. They also may be a harbinger of tougher times ahead. These companies shed several hundreds thousand jobs before and during the last recession. Car firms have only just begun to hire again, but that trend will die with a plateau in sales…

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EDITOR We believe this article expresses reasons for great concern.  However, we question the opening sentence under “#6  China Economy slows”. “A slowdown in the Chinese economy is usually seen as a cause of global commodity price inflation, but the effects cut two ways.”

They may have meant a slowdown would bring about global commodity price deflation.   Nevertheless, they are correct about the negative impact on US exports.