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Senior commodity expert warns of ‘severe US recession’

Senior commodity expert warns of ‘severe US recession’

For over a year now, economists and analysts have been sounding the alarm, predicting a looming recession for the US economy in 2024. 

This dire forecast is the result of a complex interplay of factors, including an exceptionally aggressive monetary policy tightening, driving rates to their highest levels in over two decades. The strong labor market and various crucial economic metrics, such as consumer spending and income, have all contributed to this ominous outlook. 

To add to the mounting concerns, commodity expert Mike McGlone recently identified another pivotal indicator on November 5, hinting at the potential for a “severe recession” in the US, further intensifying investors’ worries.

What is signaling ‘severe recession’? 

In his X post titled “Severe recession indication?” the Bloomberg senior commodity strategist pointed out that industrial demand for natural gas plummeted to the lowest level since 2017, “with implications for economic growth and prices.”

Natural gas serves as a US benchmark for heat, electricity, and fertilizer.

“It makes sense that gas use would decline on the back of the sharp rise to $10.03 per million British thermal unit at the 2022 peak, but it may be a while for demand to rebound after this year’s plunge to around $2.”

– said McGlone.

Furthermore, the commodity expert’s graphic shows that the “unusually low and stubborn” 250-day average of gas demand seems consistent with the inevitable implications of the Federal Reserve’s tightening and economists’ outlook for a recession to begin at the end of 2023. 

Industrial demand for natural gas. Source: Mike McGlone

Also, the strategist said that natural gas prices may have wiggle room below $2 and above $4, and could serve as an indicator of what to expect in crude: “a lower plateau before bottoming.”

In conclusion of his analysis, McGlone said that declining industrial gas use “appears consistent with a severe recession.”

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