Global Recession Possible


As a recession is defined as two successive quarters of recorded negative economic growth, several European, Asian, and South American countries are currently in recession, Russia and Netherlands among them, and the United States might not be that far behind.

Slowed Growth

During the fourth quarter of last year, the country recorded only a 0.7 percent growth in GDP compared to the same quarter for the previous year. However, considering that that for the entire year the U.S. recorded close to 2.4 percent growth, a recession does not seem immediately imminent. Those figures are not the only indicators, however, as many other recession gauges are starting to seem more alarming.

For 10 out of the past 12 months, the nation’s industrial production recorded negative readings, going down by 3 percent in just the past six months. Additionally, the Institute for Supply Management Purchasing Managers’ Index recorded 48.2 for the first month of the current year, making it a fourth consecutive month when the index was under 50, signifying there has been a slowdown in manufacturing.

Slowed Consumption

Another red flag is the fact that consumers, who are responsible for close to three quarters of the country’s GDP growth, have lessened their spending. Personal spending for December, as stated by the U.S. Commerce Department, was flat compared to the previous month, with spending on both durable and non-durable goods going down by 0.9 percent. That translates into a disastrous fourth quarter for retailers, as it is the quarter considered the most important truly reflective of consumer spending propensity.

This fact is hardly surprising, considering that wages for consumers who need to push the GDP growth up have only increased by 2.2 percent in the last five years. All of these factors could spell a slowdown in GDP growth that could push the U.S. and with it the world, into a global recession.


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