Recession Fears Grow: Leading Indicator Points to Imminent Recession in the US, But Saying It’s Not That Easy | Univision money news

A reliable indicator that helps gauge the direction of the US economy has shown that we are closer to a scenario many fear: an imminent recession.

This is the official data compilation maintained by the Federal Reserve Board of Atlanta (Fed) Keep track of GDP Now – That’s Last Week It is estimated that the country’s GDP contracted by 2.1% in the second quarter compared to the same period last year.

This is after publishing two important figures on consumer spending and private investment. Consumer spending growth slowed to 0.8% in May amid rising inflation, while private investment fell 15.2%, according to data from the statistics bureau and the private organization. Institute of Supply Management or ISM.

What does this refer to? Keep track of The Atlanta Federal Reserve does not necessarily represent an official appreciation of this entity. However, GDP now accurately predicted in the past what would happen to the US economy. And this time it is being closely watched because many are looking for clues about whether or how close we are to a recession.

With US GDP contracting 1.6% in the first quarter, all eyes are on the second quarter figure. This is because We usually talk about a recession when the economy has contracted for two consecutive quarters. Although this is an arbitrary rule, not all experts accept it.

Who officially declares recession?

Here the issue is complicated, because there is an entity, and National Bureau of Economic Research (NBER), It is considered as the singing voice when the recession is officially announced. NBER has a broader, more complex concept of what it considers an economy to be in recession, and it doesn’t simply take the fact that GDP has fallen for two consecutive quarters to say it has entered a recession.

His definition reflects this. For its experts, a recession “involves a significant reduction in economic activity that spreads through the economy and lasts for more than a few months.” In his analysis, he gives importance to more specific indicators, especially those related to the labor market and consumer income.

Moreover, there have been times when NBER has taken months since the economy went into recession to say that it has, in part, made sure that it does not take into account very short-term data in its analysis. The last recession of the US economy that this entity announced was in 2020, when it said that it was a recession for only two months due to the unprecedented hit of the Covid-19 epidemic.

Is NBER expected to announce a recession?

As explained above, unemployment and consumer spending—which depends largely on whether or not a person has a job—are important indicators of the National Bureau of Economic Research when it determines that the economy has entered a recession.

As long as employment in the state continues to show strong numbers, it is unlikely that NBER will tilt toward declaring a recession. Practically every recession has involved a significant decline in US employment.

Are there other “rules” for declaring a recession?

Yes, one of them specifically takes into account the development of the labor market. The “share base” is named after former Federal Reserve economist Claudia Arrows. The St. Louis Fed states that under this rule, an economy is considered to have entered a recession when the moving average for the last three months of the unemployment rate has risen by at least 0.50 percentage points compared to its lowest point in the past. general.

It’s a much simpler “rule” than NBER’s analysis that, for now, does not indicate the United States is entering a recession.

What we are sure of is that the Fed has a series of key rate hikes in place to curb accelerating inflation. Some of these benchmark rate hikes have been so intense, notably last month’s three-quarter percentage point increase, that there are fears they may slow or lead to a recession in the future.

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