The US economy is sliding into a recession with frightening speed.
The U.S. Census Bureau published today their October estimates of U.S. retail and food services sales. The number fell 2.8 percent from the previous month and 4.1 percent below October 2007.
This absolute decline in sales is very unusual. Normally, sales should be rising, not least because of inflation. Each year, prices go up, so even if everyone simply bought the same basket of goods year after year, retail sales would go up at the rate of inflation.
I put two arrows onto the chart above. The first, which covers the US recession in 2001-2, shows that retail sales basically flattened out when the economy weakened. The second arrow highlights the most recent data. Retail sales are actually falling despite the 5 percent US inflation rate.
Thus, it would appear that US household consumption is collapsing. Since it makes up about 70 percent of US GDP, the US must now be falling into a deep downturn.
So much for those 1 percent interest rates.