The recession is definitely here according to Lakshman Achutham, the co-founder of Economic Cycle Research Institute (ECRI). The ECRI exists to predict economic recessions and recoveries and prides itself that it has never given a “false alarm” that a recession is coming.
The ECRI operates by studying 12 “leading economic indicators” which show where the economy is headed. Some of these “Leading economic indicators” are Gross Domestic Product (GDP), Consumer Price Index (CPI), The Producer Price Index (PPI), Employment Indicators, Retail Sales Index, Consumer Confidence Index, The Beige Book, Durable Goods Orders, Employment Cost Index (ECI) and The Productivity Report. These are some of the statistics which show where the economy is likely to be headed.
When these indicators show a contagion, economic problems that are spreading like wildfire that indicates that a recession is underway. Achutham on Yahoo Finance said that the best that we can hope for is a mild recession and it could be that things “will get much worse.” We can expect lower sales and greater unemployment and a worsening of the government deficit.
According to Mark Greene, a FICO survey of risk managers and lending industry executives shows that lending executives are expecting many more defaults on debts. For example, 30% of lenders expect more defaults on car loans, 40% of lenders expect more defaults on credit card loans, and 48% expect more defaults on student loans. Lenders are becoming more pessimistic. 73% expect more mortgage defaults over the next 5 years while 49% expect more defaults until the year 2020. Over the last 6 quarters, the FICO results have been fairly accurate.
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