A recent analysis by cryptocurrency education channel CoinBureau examines a concerning report from Apollo Global Asset Management that suggests the US economy may be headed for a recession as early as this summer.
The Apollo report, titled "How are US consumers and firms responding to tariffs?", presents multiple indicators pointing to economic contraction, with particular focus on how proposed tariffs (especially on Chinese imports) might impact economic activity.
Key Economic Warning Signs
The report highlights several troubling trends:
- Corporate pullback: There's been a sharp decline in earnings outlooks among S&P 500 companies, comparable to pandemic-era pessimism, alongside decreasing corporate spending plans.
- Supply chain disruption: New orders from retailers are collapsing across multiple indicators, following an initial surge in inventory stockpiling ahead of potential tariffs.
- Transportation slowdown: Heavy truck sales are falling significantly, notable since trucks move approximately 75% of all goods across the US. The logistics managers index also shows continued weakness since the pandemic.
- Consumer stress: Consumer confidence has reached record lows—below even 2008 financial crisis levels—and concerns about unemployment are rising. Credit card delinquencies are trending upward, and more cardholders are making only minimum payments.
- Q1 GDP contraction: The first quarter already showed negative GDP growth, increasing the likelihood of a technical recession (two consecutive quarters of GDP decline) by July.
Mixed Inflation Outlook
Interestingly, the report suggests we may see short-term goods deflation rather than the inflation many fear from tariffs. This is because:
- Retailers have stockpiled inventory ahead of tariffs
- Consumer spending is declining
- Companies like Walmart have publicly stated they'll absorb tariff costs rather than passing them to consumers
- Housing costs (a major inflation component) may ease due to immigration policy changes
- Oil prices are projected to decline with upcoming OPEC production increases
The report's author, Torston, suggests that even in a worst-case scenario, PCE inflation might only rise by about 1% over the next year.
What This Means for Markets
The ultimate impact depends heavily on the final structure and scale of tariffs, particularly those targeting China. The report acknowledges several positive factors:
- The US remains "the most dynamic and exceptional economy in the world"
- China and the US have already introduced multiple tariff exemptions
- No major market mechanisms appear to be "breaking" yet
However, damage to both corporate and consumer confidence is already evident, which could be enough to tip an already-weakened economy into recession.
For investors, this suggests continued market choppiness until tariff policies are finalized, with potential for short-term growth afterward—though underlying economic weakness may persist.
