Since last week our Daily Growth Index has weakened further, surpassing a year-over-year contraction rate of 3%. This daily measurement of on-line consumer demand for discretionary durable goods has now dropped to the lowest level it has recorded since late November 2008.What's going on here can be understood in terms of Austrian Business Cycle Theory. The first leg of the downturn was reversed as a result of extremely aggressive Fed printing between late 2008 and early 2009. That money printing started to manipulate the economy higher in a distorted manner back into the capital goods sector.
► The current contraction in consumer demand for discretionary durable goods has now extended for more than 6 months.
► The day to day level of the year-over-year contraction is now worse than a similar reading of the 'Great Recession' of 2008 was after 6 months. [Although the 2008 Recession did dip lower, it was recovering at this point in time due to Bernanke's money printing in late 2008 into early 2009-RW]
► Although this contraction has not yet reached the extreme contraction rates that were seen during 2008, after 6 months it has not yet formed a bottom. Furthermore, it is now likely to last longer than the 2008 event.
The current second leg is the result of the money slowdown that began in early 2009. It isn't as "deep" because of the liquidations that occurred in the first leg of the downturn, e.g., a house in this short a time period doesn't go through foreclosure twice. The second leg is mostly about completely new liquidations that are occurring because of the propping up the Fed did with their brief late-2008, early 2009 printing.