Thursday, January 31, 2013

Is the US Economy Heading Toward Another Recession?

The standard definition of a recession is two quarters of negative growth.  While the economy has very slowly grown for the past three years, in particular for a recovery coming after a major recession, at least it has grown.  Recent reports show the economy during the last quarter of 2012 shrank for the first time since the Great Recession.  CNNMoney reports:
Gross domestic product, the broadest measure of the nation's economic growth, contracted at an annual rate of 0.1% from October to December, the Commerce Department said Wednesday. It was the first quarterly contraction since the second quarter of 2009, amid the Great Recession.

While a contraction is never encouraging, economists pointed to temporary effects that may have caused a one-time dip, and they see better growth ahead.

It's "the best-looking contraction in U.S. GDP you'll ever see," Paul Ashworth, chief U.S. economist for Capital Economics said in a research note. "The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging."

A large cut in federal spending, primarily on defense, was one of the biggest drags on growth. Defense spending contracted at a 22% annual rate.
Besides those cited above, the article is filled with additional excuses why this quarter was an anomaly.  While economists are generally predicting the slow 2% to 2.5% economic growth the U.S. has experienced during the recovery will resume next quarter, if it falls short alarm bells of a new recession will be set off.


Gary R. Welsh said...

Who says the first recession ever ended, Paul? I would argue the economic evidence suggests the first recession never ended.

Unknown said...

I found your website perfect for my needs. It contains wonderful and helpful posts. I have read most of them and got a lot from them
RES Course Provider

Unknown said...

I am very enjoyed for this side. Its a nice topic. It help me very much to solve some problems. Its opportunity are so fantastic and working style so speedy.
Property Promotions

Unknown said...

Thanks for sharing these useful information! Hope that you will continue doing nice article like this. I will be one of your loyal reader if you maintain this kind of post! This is one of the best post I found so far.
New Condo Launch Singapore