Sometimes it is useful to use financial data to show when the economy is either vulnerable to or entering into a recession. These five charts may be helpful to follow, especially as we know that consumers have been pinched by high prices and incomes not keeping up enough to qualify for expensive housing and automobiles as examples. Consumer spending remains about 70% of our economy.
Chart 1 shows that the official Federal Reserve interest rates are declining but still in the ‘painful’ range as they continue to exceed recent consumer inflation rates by over 2%. So the Fed has room to reduce short term rates further if inflation stays low, or if unemployment increases sharply.
A key advance economic indicator is the so called ‘Yield Curve’ in Chart 2 that compares the yield on 10 year Treasury Notes to short term 2 year Treasury Notes. You can see that the net of longer term rates relative to shorter term rates often increases prior to recessions by a few months, because the Fed starts to worry about the economy, while the more free market bond markets worry about future inflation and the borrower’s ability to finance those debts with continuing budget deficits. Unfortunately, the US is very dependent on foreign money to support our debt load. Unanticipated geopolitical events like wars or shortages can also impact the curve adversely. Right now, uncertainty is further created by possible tariffs affecting prices, while immigration restrictions and possible deportations could impact an already tight labor market.
Chart 3 shows that the current 10 year Treasury Notes yield of 4.6% is generally in range for a healthy economy with low inflation, but our large financial annual deficits are very serious as shown in Charts 4 and 5. Our economy is slowing, but we are not in a recession at this time by most all data.
By most accounts, our c-store industry continues doing well overall, but varies much more by region and companies’ ability to increase prices to stretched consumers to offset lower volumes and ever increasing expenses, especially labor. Money is available for our industry, which continues to impress compared to many other box store retailers.
In fact, based on recent NRC public sales, the demand remains excellent for individual stores and segment transactions. I believe this is due mostly to three reasons; great locations, the multitude of profit centers like fuel, c-store, foodservice, etc.; and the number of alternate ways to operate and finance the locations.
In case you missed it, here is my blog of two weeks ago regarding more specifics for 2025, titled, 2024 Is Ending – Big Changes in 2025?
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