macro factors economy recession Colliers International Andrew Nelson Colliers International blog commercial real estate There are at least three indicators that have people spooked about the economy, Nelson tells GlobeSt.com. “First is the downward trend on Wall Street . The stock market's recent fall of about 10% could be a leading indication that we are falling into recession, but there's a famous joke attributed to the economist Paul Samuelson that the stock market has predicted nine of the last five recessions—meaning there are a lot of false positives. Just because the stock market declines, it doesn't mean the economy will follow, too.” Nelson is cautious about what the stock market's recent volatility indicates about real estate for this year. “I don't forecast the stock market, and I don't trust people who do. But I will say any potential impacts on the broader economy depend on how long and how much. The stock market goes through these cycles of volatility periodically and then calms down. It had one period like this at the end of the summer that lasted a few weeks, and then over the next few months the market gained back everything it had lost. Now we're in another correction and volatility remains elevated. But so far it has not reached a scary level or duration.” oil prices exports A fourth indicator is technical: the purchasing managers' index or PMI , a survey conducted by the Institute of Supply Management . “When this index is below 50it means the economy is contracting, and the PMI has been below 50 for two consecutive months—the first time since the last recession,” says Nelson. “That by itself is a concern, but we need to qualify it. First, manufacturing is only about 12% of our economy, and the PMI index for services and other non-manufacturing is well above 50 -- off its peak, but still above its average during this recovery – which means these sectors are still expanding. So, overall the economy is expanding, although moderately.” CAUSE FOR CONCERN? investment A related concern is the devaluation of the yuan, which has fallen against the dollar, but not as much as the currencies of our major trading partners. “The yuan has only declined about 7% against the dollar over the last year,” says Nelson. “By contrast, the euro, Mexican peso and Canadian loonie have devalued over the last year-and-a-half between 25% and 35%. That's a much bigger impact than China.” So unless we see a significant global recession or financial contagion in emerging markets, the impact of China's slowdown on the US economy will be limited. sovereign wealth pension funds