Looking for the most reliable economic indicator, we recommend profits. They are far more than just an economic indicator. Rising profit expectations is the absolutely indispensable condition for economic recovery. The signs of an investment collapse are everywhere, in particular in the steepest and most rapid slump of profits in the whole postwar period. Manufacturing profits are at a six-years low.
Profit margins are at their lowest level in seven years.
Only false optimism about the economy's impending recovery has prevented a worse rout in equity markets. Waiting for the U.S. recession, essentially showing in a decline in real GDP, seems to resemble the wait for Becket's Godot. Well, Godot never arrived. In contrast, the U.S. recession will definitely do so. While economists and investors have cheered the Fed's rapid, sharp rate cuts and the fact that GDP has not yet dipped into negative territory, the unfolding downturn is, nevertheless, manifesting most ominous features that distinguish it negatively from all prior postwar cycles.