This article will review household balance sheets and the housing market, but we’ll quickly start with reviewing the updated data on earnings and leading indicators to show you the economic growth slowdown in real time. The table below from The Earnings Scout shows a continuation of the recent trend of weakening earnings estimates.
Source: The Earnings Scout
The estimates for Q4 continued to drop as they fell from 14.29% to 12.15% since the start of the month which makes Q4 by far the lowest growth quarter of the year. This is similar to GDP growth estimates as the median growth estimate in the CNBC rapid update has Q4 increasing 2.8% which is below Q3’s rate of 3.5%. Q1 earnings estimates dropped quicker than Q4’s earnings estimates in the past week as they fell from 7.54% to 6.82%. Q2 earnings estimates dropped to only 5.89% growth. The pattern is clear; analysts are expecting earnings growth to deteriorate. If the trend continues, there could be an earnings recession in 2019.
ECRI has been predicting a growth slowdown for over a year. This is finally bearing fruit as Q3 slowed as compared to Q2’s growth rate and Q4 is on pace to be slower than Q3 as we mentioned earlier. The chart below shows their leading indicator is now down 3% year over year.
Source: chart
Growth has been declining in the past few weeks as comparisons have gotten tougher. The co-founder of ECRI, Lakshman Achuthan, stated that there isn’t a magic level that the index hits which signals a recession will occur. Growth is at a 140 week low. We’ll be looking at how this decline stacks up against other slowdowns this cycle if the index progresses lower.
3 Reports On Households & The Housing Market
This article will include data from three pivotal reports which were just released. The three are the October Senior Loan Officer Opinion Survey on Bank Lending Practices which is released by the Fed, the fiscal 2018 Department of Housing and Urban Development’s annual report to Congress regarding the financial status of the FHA mutual mortgage insurance fund, and the NY Fed’s Q3 Household Debt and Credit report.
