Telltale Signs Of Recession

I'm seeing lifestyles that are out of stock and no longer available, even in China.

Though every recession is unique, all recessions manifest in similar ways in the real economy. By real economy, I mean the on-the-ground economy we observe with our own eyes, as opposed to the abstract statistical model reflected in official declarations of when recessions begin and end.

One characteristic that never makes it into the abstract statistical representation of recession is the light switch phenomenon: business suddenly dries up, as if someone turned a light switch off. This is especially visible in discretionary purchases, which include everything from smartphones to vehicles to eating out.

Other telltale signs of recession include:

Dead giveaway #1: businesses that seemed established and doing well suddenly close. The customers are surprised, the employees are not; they knew sales were eroding while costs were rising, and the financial situation was becoming increasingly precarious.

Dead giveaway #2: new businesses that would have thrived a few years ago close within a few months. Maybe it was the multitude of competitors or the high rents; but for whatever combination of factors, one attributes the demise to, an enterprise that seemed to have all the ingredients for success fails quickly.

Dead giveaway #3: advertising and marketing/promotion no longer move the needle. Campaigns that reliably increased sales no longer work.

Dead giveaway #4: Matriarchs and patriarchs of established enterprises retire. They typically offer rote explanations for their abrupt retirement--to spend time with the family, to enjoy the leisure they never had working 12-hour days, and so on--but the unspoken reason is their decades of experience have finely tuned their recession detectors. They know when it's about to become impossible to grow revenues and they no longer have the need or energy to buckle down and survive the decline phase of their enterprise's S-Curve.

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Disclosures: None.

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