By New Deal Democrat
This is the second of five graphs that bear watching in 2017.
The first was gas prices.
The second part of the troika that may lay the basis for the next recession is the USD. Almost 100 years ago, economist Irving Fisher identified the strength/weakness of the currency as being an indicator that led the economy by about 7 months (in the below paragraph, P' is the YoY change in prices and T is the currency value):
In 2015, we saw how the surge in the USD depressed commerce even as lower gas prices helped consumer spending. Since the US presidential election, the USD has had a lesser surge (so far) based on fears that a trade war, particularly with China, may be in the offing. Typically, negative effects have not been felt until the USD is up at least 5% YoY against other currencies:
As of last week, the USD was up 5% globally, although not against major currencies.
Needless to say, if both gas prices and the USD spike, unlike 2015, both consumers and producers will take a hit.