Approaching the 10% Decline

Although there is no single, consensus definition of what a Depression is, one widely accepted marker is a 10% contraction in the GDP. So far, by official numbers, this is still a ways off in most countries. But it is getting harder to fudge away the increasingly obvious.

March retail sales in the USA were reported yesterday having declined 9.4% year-over-year. This is now the fourth month in a row of sales declines in the vicinity of 9% year-over-year. Granted retail sales aren't the whole economy, but they are a fair proxy for the economy.

We don't expect this crash level of sales declines to continue - although it is possible - but it won't take too much longer for this shrinkage to put the economy into deeply red territory for the year. As we have stated before, we expect the Depression to continue for years. Even if there are a number of "growth quarters" sprinkled here and there (and we do expect them), the contraction should prove relentless.

For some time forward there will be a recovery bias to all reports about the economy. The drivel coming out of the Federal Reserve System is especially illustrative. It is going to take a while for it to sink in that things are bad, getting worse, and not going to recovery quickly.