“Red Flag” Event HITS America – Writing On The Wall?
(LibertySociety.com) – On April 28, the Commerce Department released gross domestic product (GDP) numbers, which showed a decline of 1.4% for the first quarter of 2022. The decrease in the output of services and goods falls short of the Dow Jones’ predicted 1% gain. Following a more than 7% growth in the last quarter of 2021, the numbers come as a disappointment but may not be all that surprising. The question is: Do the new figures mean a recession is coming to America?
What Signals a Recession?
Traditional definitions state a recession occurs when there is a back-to-back decline in GDP, measured in three-month increments. However, the National Bureau of Economic Research (NBER) changed the definition to say there must be a “significant decline in economic activity” when considering not only the GDP, but income, employment, production, and sales. According to NBER, the large decrease in numbers must last longer than just a few months. In fact, the organization said the instances of a true recession are rare.
So, measuring a recession isn’t as simple as looking at consecutive quarters any longer. Instead of taking one number (the GDP), economic experts must look at the entire economy for two months to determine if a recession is actually happening.
Recession Likelihood and Decline Factors
When the numbers showing the decrease came out, the stock market was largely unaffected, and experts believe factors pulling down GDP numbers will reverse this year, hopefully avoiding a recession.
Some of the total decline happened because of the Omicron variant spread and the Russian invasion of Ukraine. There was also an 8.5% pullback in US defense spending, contributing largely to this quarter’s final GDP. Although consumer spending increased during the quarter, the trade deficit wiped out the overall gain during the first few months of 2022.
Chief Economist Ian Shepherdson stated the United States is not “falling into recession.” He said the numbers are simply noise and not a signal of things to come. However, many other economists believe the risk of a recession is on the rise, with the federal government pulling back on its bond-buying protocol and expectations of the Fed sharply increasing interest rates.
Deutsche Bank predicts a recession will hit America in late 2023 or early 2024, but it remains to be seen.
How It Might Affect Americans
During a recession, the economy slows down overall. It also could mean a loss of jobs or decreasing incomes, a decline in real estate and other investments, and the inability to acquire credit. Depending on how the recession manifests in the economy will determine the exact impact it will have on individuals and families across the country. As residents watch recession indicators, they might want to tighten their belts, dump debt, and prepare for a downturn, just in case.
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