Publications: Notes at the Margin

Oil Markets: Leading Indicator of Recession? (May 5, 2025)

 

The US economy is doing just fine today, thank you. While the real GDP data released last week showed a slight decline in growth, “core GDP” moved ahead smartly. However, storm clouds are looming. Returns to storage—the data we publish here that few if any readers likely examine—warn of a coming slowdown. As we explain below, these returns were a leading indicator for three major recessions that occurred during the three decades our data cover.

 

We conclude from our analysis that a recession is imminent. It could be severe absent large US trade concessions that may include canceling most of the tariffs imposed by President Trump. These tariffs will seriously slow China’s economy as well. The pressure on oil markets will be intense, especially given the oil producers’ May 3 decision to boost output.

 

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