Officially, we don't know when a recession has begun until after it is over. However, there are several indicators that seem to show a recession is brewing.
First, a China index dropped from 49.3 to 48.7.
The HSBC Flash Purchasing Managers Index, the
earliest indicator of China's industrial sector, retreated to 48.7 in
May from a final reading of 49.3 in April. It marked the seventh
straight month that the index has been below 50, indicating contracting
economic activity.
The figures
signal that the sluggish economic conditions of the first quarter are
set to continue throughout the first half of the year in China's longest
slowdown since the global financial crisis.
--http://www.reuters.com/article/2012/05/24/us-china-economy-pmi-idUSBRE84N08B20120524
Second, the DJIA hit 13,279 on May 1st and has been dropping ever since. It closed on May 25th at 12,455 and seems to be drifting downward.
Third, and probably most important, is the Weekly Leading Index published by the Economic Cycle Research Institute. They publish a number each Friday for the preceeding week. It is unknown how they get their data, but it seems to be pretty good. For the week ended May 4, the WLI rose to 125.4. For the week ended May 11, it dropped to 124.5. For the week ended May 18, it dropped again to 123.1. If this number drops below 120.0 then we are probably in a recession. So, this is an important number to watch. If it falls for the 3rd straight week, then we have a problem.
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