As expected - and argued in this space for a while - a US recession is now unavoidable: the year started with (trhese being the top Bloomberg news headlines today:

- the manufacturing ISM for December plunging to 47.7 (with a reading below 50 signaling an outright contraction of the manufacturing sector);

- retail sales being lousy in the holiday period (they fell 0.7% in December relative to November according to Redbook Research and they fell 0.2% relative to the week before in the week ending on December 29th according to the ICSC/UBS securities weekly index); and they fallen in real terms in this holiday period relative to a year ago;

- growth of internet sales being mediocre; 

- LBO deals being dropped (the PHH- Blackstone deal) as financing shrinks. 

- oil surging to $98 a barrel;

- National City slashing payout and jobs;

- the outlook for 2008 Detroit car makers and overall auto sales being awful.

- Global manufacturing activity fell sharply in December to a near 4-1/2 year low; so the world is not decoupling from the US hard landing. 

No wonder the stock market started the year with another bearish fall; and as predicted here yesterday a lousy stock market in 2007 will look good compared to an awful stock market in 2008.

The combination of the worst housing recession ever getting worse, a severe liquidity and credit crunch being worse now than in August, oil close to $100, capex spending by the corporate sector falling for four months nows, commercial real estate being in serious trouble, the labor market beginning its slack (as initial claims and continuing claims  are surging), and a shopped-out, saving-less and debt-burdened consumer having stopped its shopping spree this holiday season will all lead to a severe - rather than mild - recession in 2008.

According to Bill Gross this recession may have already started in December 2007; when eventually the NBER business cycle dating committee will date (in the next 12 months) the peak of this business cycle December 2007 may indeed end up being the beginning of this recession or, at the latest, Q1 of 2008.

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