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12 charts show the economy is about to enter a full-blown recession: BofA



But so far, no recession has materialized as the jobs market and consumer spending have remained fairly resilient.

But according to Bank of America, there are plenty of signals that suggest a recession has not been avoided. These are the 12 charts that indicate the US is on the verge of entering a full-blown recession, according to Bank of America’s Michael Hartnett.

1. A decline in manufacturing activity

ISM data



Bank of America


“March ISM was 46.3, lowest since May 2020. In past 70 years whenever manufacturing ISM dropped below 45, recession occurred on 11 out of 12 occasions (exception was 1967),” BofA said.


2. A decline in manufacturing often coincides with lower earnings

ISM and earnings growth



Bank of America


“New orders component of manufacturing ISM at 44.3. New orders < 45 have coincided with EPS recessions (see 1991, 2001, 2008, 2020),” BofA said.

3. Global earnings model suggests imminent decline

BofA Global EPS Model



Bank of America


“BofA Global EPS Growth Model currently predicts EPS to fall -16% year-over-year by August. Model is driven by Asian exports, global PMIs, China financial conditions, US yield curve,” BofA said.

4. Steepening yield curve often precedes a recession

Yield curve inversion chart



Bank of America


“US Treasury 2-year/10-year yield curve flattens and inverts in anticipation of recession. Yield curves steepen immediately as recessions begin. US Treasury 2-year/10-year yield curve has steepened from -110 basis points to -50 basis points in past 4 weeks,” BofA said.

5. Price of oil showing concerns of a recession

Oil prices and recessions



Bank of America


“Oil prices historically rise into recessions and decline during recessions. Latest OPEC+ output cuts underscore recession concerns, with limited upward pricing pressures from China reopening so far,” BofA said.

6. The jobs market often follows manufacturing activity

Jobs market and manufacturing activity



Bank of America


“Weak ISM manufacturing PMI suggests US labor market will weaken next few months,” BofA said, adding that it viewed the February and March jobs report as “the last strong payroll reports of 2023.”

7. Global home prices are falling

Global real estate prices



Bank of America


“Global house prices turning negative as higher rates hit real estate in US, UK, Canada, Sweden, Australia, and New Zealand,” BofA said.

8. A credit crunch will hurt the jobs market

US lending standards



Bank of America


“US banks have been tightening lending standards to small companies past few quarters. Credit crunch to intensify and highly correlated with small business demand for workers. Should May SLOOS report show drop in loan availability to -10 or below = unambiguous credit crunch,” BofA said.

9. A decline in European bank lending

Euro bank lending



Bank of America


“Bank lending in Eurozone down three months in a row (very rare outside Great Financial Crisis, Euro debt crisis, COVID). $14 trillion Eurozone economy highly dependent on bank credit,” BofA said.

10. Weak jobs market leads to big interest rate cuts

Job market and interest rates



Bank of America


“Falling US job openings = weaker labor market = lower Fed funds rate. Yield curve likely to steepen very dramatically next six to 12 months as Fed cuts ahead of election but long-end downside inhibited by inflation and fiscal shenanigans,” BofA said.

11. Stocks dropped after last Fed rate hike in inflationary periods

Stocks and interest rates



Bank of America


“Our view: Sell the last rate hike. Investors too optimistic on rate cuts and not pessimistic enough on recession. ‘Sell the last hike’ was correct strategy for stocks in inflationary ’70s/’80s, ‘buy the last hike’ worked in the ’90s disinflationary market,” BofA said.

12. Stocks and recessions don’t mix well

Stocks and recessions



Bank of America


“Recessions reliably negative for equities throughout history and insufficiently discounted in advance. Plenty of room for more S&P 500 downside,” BofA said.



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China’s economy is raising red flags across markets as rebound disappoints



Financial markets have been raising red flags recently about China’s economy, but analysts said Wall Street is missing the big picture.

Growth in the world’s second largest economy accelerated to 4.5% in the first quarter from 2.9% in the fourth quarter following the relaxation of COVID restrictions late last year.

But more recent data have pointed to slowing growth in retail sales as well as drops in home sales, industrial production and fixed-asset investment.


That disappointed investors hoping for a bigger post-COVID rebound and led Wall Street to trim its growth estimates for the full year. Worries about China’s economy have rippled through markets.

Earlier this month, the yuan fell past a psychologically important level of 7 per dollar for the first time this year. The price of copper, once expected to see sizable gains due to high demand from Chinese factories, hit a four-month low in mid-May.

Meanwhile, shares of luxury brands that are reliant on China’s consumer base, have started tumbling on stagnant activity.

Chinese equity markets were not immune to slowing performance, as the CSI 300 index continued to slip this week. At the end of April, declining hopes for added stimulus brought the Shenzhen and Shanghai indices down by $519 billion in one week alone.

The stalling performance prompted Rockefeller International’s Ruchir Sharma to call the rebound narrative a “charade.”

But for one analyst, the growing pessimism around China’s economy could stem more from unrealistically high expectations and Wall Street’s tendency to prioritize immediate metrics over long-term outlooks.

“I feel sorry for these people in some ways, because every time the Chinese release some data, they have to say something about it,” Nicholas Lardy of the Peterson Institute for International Economics told Insider.

Heightened anticipations may be due to China’s response to the 2008 financial crisis, when Beijing infused the economy with massive stimulus and achieved double-digit growth, Pantheon Macroeconomics’ Duncan Wrigley said.

However, it also led to a huge debt hangover that China has worked to resolve for much of the last decade. So while demand is slowing, limiting debt growth is equally prioritized by party leaders, he said.

The country set a more conservative 5% growth target in March, which both analysts see as achievable. Although the country will avoid full-scale stimulus to reach the goal, it has a number of tools to ensure growth keeps ticking upwards.

Despite its aim to limit debt, China could increase the availability of cheap loans to sectors in need, as well as lift the lending quota for the three main policy banks, while allowing them to invest in local projects, Wrigley said.

If this isn’t enough, he noted that the People’s Bank of China could ease financial conditions later in the year, such as decreasing the reserve requirement ratio for banks.

But youth unemployment remains high, while heightened geopolitical risk may deny China’s access to foreign technology.

And private investment, a major source of growth in China, has nearly collapsed in the past 15 months, Lardy said.

This may have to do with stringent regulation of Chinese business, as President Xi Jinping expands the role of the state in the market, dissuading business owners from investing in their firms, he said.

“That’s the one big negative factor that I worry about more than all the other things that we have talked about. Why is private investment so weak?” he said.



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Quebec proposes making French mandatory for all economic immigration programs




Quebec is proposing that speaking French become mandatory criteria for provincial applicants.

Quebec Premier Francois Legault has proposed major changes to Quebec’s economic immigration criteria.


Speaking on May 25 with the Minister of Immigration, Francisation and Integration, Christine Frechette and the Minister of the French Language, Jean-François Roberge, Legault says the changes will ensure that nearly 100% of new economic immigrants to Quebec will know French before they arrive in the province by 2026. This is meant to promote Francophone economic immigration in Quebec.

“As we have seen for several years, French is in decline in Quebec,” said Legault. “Since 2018, our government has acted to protect our language, more than other successive governments since the adoption of Bill 101 under the Lévesque government. But if we want to reverse the trend, we must go further. By 2026, our goal is to have almost entirely Francophone economic immigration. We all have a duty, as Quebecers, to speak French, to transmit our culture on a daily basis, and to be proud of it.”

Discover if You Are Eligible for Canadian Immigration

Knowledge of oral French will be required for adults. This is meant to ensure that those who wish to settle in Quebec will be able to communicate in French throughout day-to-day interactions at work and in their communities.

The changes are part of a new permanent immigration program for skilled workers in Quebec. The province says the Skilled Worker Selection Program will “take into account the diverse needs of Quebec.”

Candidates in the program will be evaluated in four categories that have not yet been made clear, but the province says that three of the categories will require that the principal applicant and their accompanying spouse have knowledge of French.

There will also be revisions to existing programs. For example, the work experience requirement will be removed from the Quebec Experience Program for graduate students from a French-language study program.

Family reunification measures include making it mandatory for the guarantor to submit a plan for reception and integration that will support the learning of French for the person they are hosting.

Immigration is a shared responsibility between the federal and provincial governments. Quebec’s agreement is unique from other provinces in that it can select all its economic immigrants. Quebec does not have the authority to select family class sponsorship applicants or those who arrive in Canada as refugees or other humanitarian classes.

For 2023, Quebec has targeted that 65% of newcomers admitted to the province will be economic class.

Increasing immigration numbers in Quebec

The province is also considering raising the number of permanent selection admissions from 50,000 to 60,000 per year by 2027. This is in stark contrast to Legault’s recent comments that there was “no question” of Quebec accepting any rise in the number of newcomers and publicly rejecting the federal Immigration Levels Plan, which has a target of 500,000 permanent residents admitted to Canada each year by the end of 2025.

These changes also follow Quebec’s Immigration Levels Plan for 2023, where it was announced that the province would move away from plans that forecast only the coming year and begin introducing multi-year plans for immigration by 2024.

Why the changes?

Quebec is unique in Canada as it is the only province where French is the official language. The province is fiercely protective of its language, saying it is vital to protecting Quebec’s unique culture and status.

Legault is the leader of the Coalition Avenir Québec (CAQ) and is currently in his second term as Quebec’s premier, having been reelected last October. One of the main pillars of the CAQ party is to protect the French language in Quebec.

Immigration was one of the key issues in the recent election. Throughout his campaign, Legault said that Quebec would allow only 50,000 immigrants per year into the province as it would be difficult to accommodate and integrate more than that into Quebec society. He said that accepting more than that would be “a bit suicidal.”

Regardless, Quebec, like the rest of Canada, is experiencing a labour shortage as the population ages and the birth rate remains low. A report released last March by the Canadian Federation of Independent Business shows that the province could face an annual shortfall of up to nearly 18,000 immigrants, who would be able to fill Quebec’s labour needs.



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Lira hits record low, but stocks rise after Erdogan win in Turkey



The Turkish leader won the presidency for a third time after a run-off vote on Sunday.

The Turkish lira has plunged to record lows after the re-election of President Recep Tayyip Erdogan, a sign that currency markets are not confident in the country’s economic future after the longtime leader’s re-election.

The Turkish currency weakened to 20.01 to the dollar on Monday after the high-stakes run-off a day earlier.

But Turkish stocks, on the other hand, rose as Erdogan entered a third decade in power with the benchmark BIST-100 index up 3.5 percent and the banking index rising more than 1 percent.


The lira fell to a record low as the country battles a cost of living crisis and depleted foreign reserves.

On the campaign trail, Erdogan pledged to slash inflation to single digits and boost economic growth, a message he reiterated in his victory speech late on Sunday. But analysts said his economic policies are unorthodox and predicted they will lead to more pain for Turks.

“In our view, Erdogan’s biggest challenge is Turkey’s economy,” Roger Mark, an analyst at the Ninety One investment management firm told the Reuters news agency. “His victory comes against a backdrop of perilous economic imbalances with his heterodox economic model proving increasingly unsustainable”.

Hasnain Malik, head of equity research at Tellimer, an emerging markets research firm, told the agency: “An Erdogan win offers no comfort for any foreign investor.”

“Only the most optimistic would hope that Erdogan now feels sufficiently secure politically to revert to orthodox economic policy,” he said.

Interest rate cuts sought by Erdogan sparked a devaluation of the Turkish lira in late 2021 and sent inflation to a 24-year peak of 85.5 percent last year. The president had argued that higher interest rates cause inflation while central banks around the world were raising rates to reduce price rises.

Turkey’s struggling economy, also reeling after the country’s devastating double earthquakes in February, was a major thorn in Erdogan’s prospect for re-election.

The leader has defended his economic policies, reassuring Turks that investment, production, exports and an eventual current account surplus will drive up Turkey’s gross domestic product.



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