Chart Of The Day

David Rosenberg: The Coming Negative Export Shock

David Rosenberg has an indicator for us here that isn’t too mainstream.  He says the correlation between exports and new orders could prove prescient in forecasting a recession in the US:

“I think that there may be a time, before too long, when we will walk into the office to find that they US prints a negative GDP reading on the back of a negative export shock that does not appear to be in any forecast – let alone the consensus.  Look at the pattern of ISM export orders:

– April 59

– May 53.5

– June 47.5

– July 46.5

This is called a pattern.  And this is a level that coincided with the two prior recessions.  As the chart below vividly illustrates, there is a significant 81% correlation between annual growth in total US exports and the ISM new orders index (with a 4 month lag).  So either the market has already priced this in or it is going to end up coming as a very big surprise….”

Source: Gluskin Sheff

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