Unusual Indicator Says We Could Be Heading for Recession

Unusual Indicator Says We Could Be Heading for Recession Photo (cc) by StockMonkeys.com

The U.S. economy might be chugging along in the wrong direction, judging by railroad cargo.

In 2015, railroad cargo decreased by more than it has in six years, Bloomberg Business reports. Some analysts say that might bode poorly for the economy at large.

Bank of America analysts write in a recent note:

“We believe rail data may be signaling a warning for the broader economy.

Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over-year basis. … The current period of substantial and sustained weakness, including last week’s -10.1 percent decline, has not occurred since 2009.”

The analysts examined data from the past 30 years for context and found that all such drops in railroad cargo preceded or coincided with an economic slowdown, Bloomberg reports.

The analysts write:

“Similar periods of weakness have occurred in only five other instances since 1985:

  1. the majority of 1988
  2. the first half of 1991
  3. several weeks in early 1996
  4. late 2000 and early 2001, and
  5. late 2008 and the majority of 2009

… all either overlapped with a recession, or preceded a recession by a few quarters.”

According to the National Bureau of Economic Research, a private nonprofit, the U.S. economy has been in recession three times since 1985:

  • December 2007 to June 2009
  • March 2001 to November 2001
  • July 1990 to March 1991

Do you think the economy could be headed toward another recession? Share your thoughts below or on our Facebook page.

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