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The single best recession indicator is signalling the economy is about to get even worse.
But most investors won’t even notice.
All they’ll see is another “bonus” Prime Day-style being held by Amazon (AMZN) right now.
But for investors looking beyond the headlines (and the Amazon PR army helping to write them), they’ll see a clear and obvious warning and be taking action now.
Let me explain.
Amazon’s depth of knowledge about American consumer activity and trends is nearly unparalleled.
Amazon knows all and it knows what’s happening right now.
They ship 10 million packages a day.
They see the decline. Every minute. Every hour.
They know what’s up.
And the fact they’re having a second major sale less than three months after the last Prime Day sale is a major warning sign.
That is, once you understand what “Prime Day” is all about.
It’s a big sale dressed up with some pretty sweet deals.
If you’re in the market for a robot vacuum or Alexa device, this is the time to buy.
And even for people who don’t get excited, there’s usually an opportunity to buy a gift card and get a 10% to 20% bonus just for doing so.
But what the Prime Day events are really about is unloading junk inventory that’s been piling up.
That’s why a second sale like this should be a big warning sign to investors watching closely.
Because inventories are one of the best economic indicators around.
And inventories will signal where the economy is really headed long before it shows up in final GDP data.
Amazon having a big enough inventory to unload is a problem.
But it’s not just Amazon at this time.
Retailers across the country are facing rising inventory levels.
This chart from the Federal Reserve tracks retailer inventory levels over time and shows exactly where we are in the inventory cycle:
Granted, inventory levels have been at historic lows over the last year, but they’re rising fast.
And their rise has preceded every recession since 1990.
This is the key number to watch.
For investors, when Amazon, a company with near real-time access to the behaviour of tens of millions of consumers, is clearly gearing up for everything to get still worse before it gets better.
You might want to be prepared too.