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  TRI-Canada sees no Canadian GDP Contractions thru 2017 horizon

Feb 20th delayed FreeVenue public release of Nov 20th MemberVenue guidance ~ After a bursting of the housing bubble in June and two subsequent months of contraction, the Trendlines Recession Indicator weighs there to be enuf critical mass in the economy for an increasingly stronger expansion of the business cycle.  Real GDP growth is gauged by TRI to have been 1.9% in October, up from a o.0% pace in September (Q3).  Since the last update, StatCan has released data inferring August's RGDP was 1.3%  (TRI = -1.5%).  The current TRI outlook projects a 2.0% rate in November & 2.0% for Q4.  After a brief setback to 1.3% in Q1, TRI today forecasts a much more impressive 4.6% GDP crest in 2014Q4 ... en route to an end-of-cycle soft landing of 2.2% in 2017Q4.

Following an RGDP trough in May 2009, Canada's fiscal stimulus plan served up a robust economic Recovery.  The transition to Expansion of the next business cycle began afresh in Aug/2010 upon RGDP surpassing its 2008 peak.  At 7.3% in Oct/2011, however, the Unemployment Rate is not yet half way back to its pre-recession 2007 low of 5.3% after rocketing to an 8.7% peak in Aug/2009.

Factors contributing to short/medium term weakness of the TRI outlook continue to be:  (a) waning Fed/Prov fiscal stimulus cheques;  (b) high oil prices;  (c) an Export killing "par-plus" Loonie & (d) the Canadian Housing Bubble.

click chart for graphic view back to 1952, outlook table & full discussion...

 USA "Real" Unemployment Rate drops to 16.2% in October

Feb 4th delayed FreeVenue public release of Nov 4th MemberVenue guidance ~ Today's headline USA Unemployment Rate for October may be 9.0% (U-3), but the dire state of the jobless is better reflected by the REAL Unemployment Rate of 16.2%.  The latter includes discouraged/marginally attached workers and economically necessitated part-timers.  The rate is down from 16.5% in September, but is still barely below the Great Recession induced high of 17.4% set October 2009.

The North American auto sector rebound was strangled in early February upon gasoline & crude prices surpassing the critical thresholds of $3.26/gal & $90/barrel.  The Gas Pump analysis concluded breach of a definitive Gasoline/GDP ratio that had induced collapses of Light Vehicle Sales in 1980, 1990 & 2007 would have similar consequences.  And, right on queue,  vehicle volumes fell 13% by June.  As the crude price subsided to $94, sales volumes rebounded to February levels, but the recent intrusion into triple digits could once again stymie auto sector activity and employment.

click chart for full discussion at UR site...

Jan 31st delayed FreeVenue public release of Oct 31st MemberVenue guidance ~ Over the past 90 days, the average/median home price fell $300/week in Australia, $1,500/week in Canada, $800/week in USA & £200/week in the UK.  The USA realty bubble over-corrected this Summer and the annual median home price is 4% below the long-term Price/Family-Income ratio trend.  The UK, Australia & Canada face a prolonged stifling of economic activity due to the assault on disposable incomes by the weight of home mortgages and rent.  Adding in the burden of cumulative high petroleum costs, the fundamentals are in place for Technical Recessions in all three jurisdictions.

Families most at risk are in the UK where the average home is overpriced by 120%.  The Australian median home is currently 36% overpriced.  Canada's realty bubble finally burst in June 2011, but the average Canadian home is still 32% overpriced and 2.1 x's its American counterpart.  As such, the Canadian economy contracted in June & July and the TRENDLines Recession Indicator projects sub 2% GDP 'til 2014Q3.

The Conservative Federal Gov't & Bank of Canada talking points blame the Japanese earthquake, EURO troubles & Justin Bieber but CMHC is clearly at fault for this situation.  Canada was the last G-20 nation to fall into Recession in 2008 and the first one out - not by clever fiscal/monetary policy but because CMHC was enabling the housing bubble by condoning 5% minimum downpayments for its high-ratio mortgage insurance coverage.  The present economic downturn is solely a "made-in-Canada" malaise and has been foretold in this venue since March 24 2010.  It is scandalous the measure continues in place and Canadian taxpayers are clearly at risk.  If there is any sense of accountability in Ottawa, look for heads to roll at CMHC.

click chart for the USA New Homes graph & full 4-nation Bubble discussion ...

  TRI-USA sees no GDP contractions for balance of Business Cycle

Jan 28th delayed public release of Oct 28th MemberVenue guidance ~ September saw the American economy finally surpass its Dec-2007 Real GDP high water mark.  However, the TRENDLines Recession Indicator projects the weakness of the Recovery will be replaced by an even slower Expansion of the new business cycle on the short term.  The October Real GDP growth rate is gauged at 2.2%, down from 2.4% in September.  Yesterday, BEA announced its first estimate for Q3 (Sept) @ 2.5% (vs 2.4% TRI).

TRI's fuzzy horizon extends thru a full business cycle.  It is presently forecasting 1.8% GDP for November, 2.1% in Q4 & 1.3% by 2012Q1.  Today's outlook upgrades Q4 slightly, reflecting the easing of this Spring's high petroleum prices on the especially vulnerable auto sector.  However, the effects of cumulative fossil fuel price increases are still permeating thru the economy.  As such, the growth rate will worsen and trough @ 0.5% in Feb-2012.  Under the present toxic political environment, TRI projects a crest to this cycle of only 4.0% in 2014Q4.  The model forecasts 5-yr mortgage rates shall rise 2.0% as the business cycle attains maximum momentum in 2015.  Monetary Policy actions by the Federal Reserve & the Treasury Secretary's guidance to Congress with respect to Fiscal Policy will ultimately determine whether the current cycle's bottom in 2017Q4 will be a hard or soft landing, but at this time the latter is indicated.

click chart for graphic view back to 1970, outlook table & full discussion...

G-20 Recession Monitor:  only Japan contracting

Jan 10th delayed FreeVenue public release of Oct 10th MemberVenue guidance ~ Global GDP in 2011Q3 is running at a 3.6% pace and transitioned from "recovery" to cycle "expansion" mode in Feb/2010.  Real GDP was -6.3% at the depth of the Recession in 2008Q4.  Japan and Canada are the only G-20 nations contracting today.  Japan's earthquake/tsunami induced downturn is a Technical Recession.

Barrel Meter analysis reveals a new round of fossil-fuel induced G-20 Recessions was narrowly averted.  Crude price reached $113 (avg) in April, a tad shy of the $116/barrel threshold which signals breach of a definitive Crude-Cost/GDP ratio to which several nations would be vulnerable.  Contract oil has since drifted to $96 and is presently forecast to briefly flirt with $62 in July 2013 in the absence of OPEC intervention.

The duration of the global Recession was 2008Q3 to 2009Q1.  Despite the mainstream media hysteria, at its worse only 12 G-20 nations (representing 53% of global GDP) were in Recession.  2008's -0.4% GDP decline was the first annual global contraction in the last four decades.

The repercussions of the 2011 oil price spike did impact the USA auto sector.  Since Nov-2009, the TRENDLines Barrel Meter & Gas Pump models had been forecasting unit sales of New Cars & Light Trucks would suffer the same fate of 1980, 1990 & 2007 if a definitive Gasoline/GDP ratio was again surpassed.

click here for more G-20 graphs & full discussion...

  USA Debt Wall - Structural Deficits Leading to Treasuries Crisis in 2022

Jan 9th delayed FreeVenue public release of Oct 9th MemberVenue guidance ~ After a decade monitoring the issue, Trendlines Research began publishing alerts in early 2009 warning the USA Federal Gov't is headed for an inevitable financial crisis related to its weekly Treasury auctions.  With concern over the integrity of sovereign debt, bond vigilantes are increasingly monitoring Deficit/GDP & Nat'l-Debt/GDP ratios.  It appears the current Wall Street spotlight on European nations will be donned on American Treasury activities within eleven short years.

Building on certain measures within the January Obama Budget, the Tea-Party was instrumental in using the Debt Limit vote to negotiate further present-decade expenditure cuts.  This served to postpone the Deficit/GDP ratio exceeding 3% 'til 2022.  However, all the good seemingly good intentions only means the Debt by 2021 will $23 billion instead of $22 billion.  And that sets the date for my forecasted first sovereign debt downgrade ... to "B" from "A".  3% has long been the accepted threshold past which it is difficult for a jurisdiction to maintain sustainable budgets.  Indeed the USA is three times that today, but sunsetting of Recession fiscal policy measures and this Summer's scheduled cuts should see the ratio dip to 1.0% in 2018.  After that date and barring further intervention, structural deficits take command of the USA's demise taking the Deficit/GDP ratio to 24% over the next three decades.

The Federal Gov't is on a path to double today's $15-trillion National Debt by 2026 and triple it by 2032.  When we commenced this graphic, most buyers of US Treasuries were unaware of these precise numbers, but they have had a sense for a while that America's fiscal well being was suffering from substantial mismanagement and a potentially unsustainable future.

click chart for Debt Wall's full discussion...

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blast from the past with chart update

July 21 2010 ~ Due to exorbitant gasoline and diesel prices at the pump, USA Car & Light Truck sales collapsed in 1980,  1990 & 2007.  On its present trajectory, the same fuel cost/GDP ratio that initiated these episodes of dramatic demand destruction will be revisited upon $3.42/gallon gas ($92/barrel crude) ... probably in 2011Q1. 

Ignoring the Cash-for-Clunkers anomaly, annualized sales have climbed back to as high as 11.8 million from 9.1 in Feb/2009.  See our Gas Pump & Barrel Meter charts for lots more discussion on the real factor thrusting the USA economy into double-dip.

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   Real farmers don't live on subsidies... they live in Brazil !

                                                                                                                                                              Freddy Hutter, TrendLines Research,  Aug 4  2004

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