Is the USA in recession?

[RobAnybody]

I'm curious if someone can explain this Quarter's contraction. And I don't mean "high gas, high housing, high eggs" & whatnot, which I don't dispute at all. Just... well, why now? That stuff has been going on for a while. What led to the contraction this Quarter? And why will it/will it not continue next Quarter?

Like this, for example:

Most of it can be tied to the decline in exports and the increase in imports. Annualized imports were up ~17% and exports down ~6%. Apparently if you exclude the net exports from the calculation, GDP was up 1.7%

Those are factual statements (I assume - I'm not gonna go check), but why did they lead to a "halfway to recession" now exactly instead of before now?

 

[Hygro]

I'm curious if someone can explain this Quarter's contraction. And I don't mean "high gas, high housing, high eggs" & whatnot, which I don't dispute at all. Just... well, why now? That stuff has been going on for a while. What led to the contraction this Quarter? And why will it/will it not continue next Quarter?

Like this, for example:
Those are factual statements (I assume - I'm not gonna go check), but why did they lead to a "halfway to recession" now exactly instead of before now?

Good question, why now? Here are graphs to back up what Lexicus and I said in the first page:

Spoiler :

GDP (inflation adjusted) is the top red line. It is comprised of Consumption + Investment + Government + Foreign Trade. Government is Spending - Taxes. Trade is Exports - Imports. In this graph, we have stand-ins for the full accounting. Consumption is up, investment is up, government spending is down (but, not on the graph, tax receipts are up 25%).

So yeah taxes are up and government spending is down. Economy is down for it, even higher good private spending.

The question is, with previous new government spending, aka new money, is that enough to fuel the private sector forward and have growth continue from this small contraction? Or is this contraction going to undermine the private sector, perhaps made worse by further decreases in spending and increases in taxes?

Unmentioned is that interest rates are going up, which makes all loans more expensive and therefore reduces their number, reducing private spending and business investment.

 

[Birdjaguar]

Those are factual statements (I assume - I'm not gonna go check), but why did they lead to a "halfway to recession" now exactly instead of before now?

1. Expenditure Approach
The expenditure approach is the most commonly used GDP formula, which is based on the money spent by various groups that participate in the economy.

GDP = C + G + I + NX
C = consumption or all private consumer spending within a country’s economy, including, durable goods (items with a lifespan greater than three years), non-durable goods (food & clothing), and services.
G = total government expenditures, including salaries of government employees, road construction/repair, public schools, and military expenditure.
I = sum of a country’s investments spent on capital equipment, inventories, and housing.
NX = net exports or a country’s total exports less total imports.

Once you calculate GDP for a quarter, you can calculate the change from the previous quarter. GDP was 6 last quarter; in the previous one it was 12, so the change was -50%.
Numbers happen when they happen. Some are known quickly other can lag. Often GDP are revised as new numbers come in late.

From what I know, if you dropped the NX from the first quarter numbers, the result is a 1.7% gain. That seems to indicate that the internal to the US numbers are all pretty good. In 3 months we will know more.

 

[Naskra]

In 3 months we will know more.

In three months you will have a different opinion, you will know neither more nor less.

 

[Birdjaguar]

In three months you will have a different opinion, you will know neither more nor less.

Speak for your self. In 3 months we will have 2nd Q GDP. If it is positive, then my guess was right. In 3 months we'll be able to judge if volatility continues. Foretelling the future is hazardous at best. In my post above I did not do much. In my prior post I did a bit more.

Looks pretty good to me.
I expect stocks to be volatile through the election (day traders making money?). Given that corporate profits are doing well, no crash? Maybe a buying opportunity later?

None of these though will change my investments or strategy. New data should always have an influence on ones thinking.

 

[RobAnybody]

Unmentioned is that interest rates are going up, which makes all loans more expensive and therefore reduces their number, reducing private spending and business investment.

I'm curious about his. By all indicators I, in my limited knowledge know, interest rates *need* to go up, & will continue to go up. Will this fuel a recession, or can a recession be averted despite this happening?

EDIT: And if the answers are, respectively: "Yes, but No", is that necessarily a bad thing?

 

[Farm Boy]

A recession changes who eats the losses.

 

[Lexicus]

I'm curious about his. By all indicators I, in my limited knowledge know, interest rates *need* to go up, & will continue to go up. Will this fuel a recession, or can a recession be averted despite this happening?

The Fed is choosing to raise interest rates, but the only way the Fed can curb inflation substantially is by hiking interest rates enough to cause a recession. The graduated, small hikes they are doing now are not going to work.

Also to be clear, interest rates do not spontaneously go up or down. The Fed sets them as a matter of policy.

 

[Hygro]

I'm curious about his. By all indicators I, in my limited knowledge know, interest rates *need* to go up, & will continue to go up. Will this fuel a recession, or can a recession be averted despite this happening?

EDIT: And if the answers are, respectively: "Yes, but No", is that necessarily a bad thing?

Interest rates don't need to go up, because we don't need to value the harm of inflation-based rationing above the harm of unemployment-based rationing.

But to your question, without corresponding increases in government spending, raising interest rates will cause a recession sooner or later.

 

[Farm Boy]

Follow the real goods in an inflationary international trade situation and a recession based one. If there do happen to be shortages of real goods and supply flows.

There is a pretty huge political hit to the global economy right now. I mean, what goes into all this ammunition that's being fired off in the fertile fields of Europe? Should you be buying investments in brass? Potash seems a solid bet for the moment. Everything sort of sucks. So everything is unsettled.

 

[Spidernova]

I can only speak from personal experience, but I'm very much a low income earner, and pretty much everyone in my circle has cut consumption. But I know that my own small bubble of us poor folks probably doesn't have much relevance to the wider economy.

 

[Birdjaguar]

I can only speak from personal experience, but I'm very much a low income earner, and pretty much everyone in my circle has cut consumption. But I know that my own small bubble of us poor folks probably doesn't have much relevance to the wider economy.

Which cuts were hardest or most significant?

 

[Kaitzilla]

I cut back on fast food.
Lots of $0.99 bags of mixed veggies and $10 bags of cooked chicken breasts from grocery store now.
Cajun seasoning can make that go pretty far.


The Hardees triple bacon beast burger is over $10 now and it only has 1400 calories.

Spoiler :

Forget the arteries, his car!
I'd have painter's splatter plastic from the waist down

 

[Birdjaguar]

Cutting out fast food is always a plus.

 

[Spidernova]

Which cuts were hardest or most significant?

Eating out is the biggest one, especially as a social group thing, I'm driving a lot less, pretty much only to work and back, and I canceled a couple subscriptions. Only one I really miss there is audible.
Oh, and I've pretty much totally stopped drinking.

 

[Birdjaguar]

Not drinking should save you a lot. Smart.

 

[Samson]

Once you calculate GDP for a quarter, you can calculate the change from the previous quarter. GDP was 6 last quarter; in the previous one it was 12, so the change was -50%.
Numbers happen when they happen. Some are known quickly other can lag. Often GDP are revised as new numbers come in late.

From what I know, if you dropped the NX from the first quarter numbers, the result is a 1.7% gain. That seems to indicate that the internal to the US numbers are all pretty good. In 3 months we will know more.

I do not think that is the calculation in the graph above, as it is "inflation adjusted". If the GDP was 12 and is now 6, and the inflation rate is 100% then the change is -75%. If the inflation rate is 8.3% and the nominal GDP growth rate is 1.7% that make the real GDP change -6.6%, which is not so good.

 

[Terxpahseyton]

wake up people

the whole world economy is going down the drain.

And the true rulers - money rules world, we all know it - they aren't exactly. Surprised... but busy hiding it. Finding... producing this or that special circumstance... only making it appear so, when in fact long ago foreseen as inevitable by Karl Marx. But everything is alright, don't worry...yeah right

 

[Gorbles]

Not drinking should save you a lot. Smart.

Smart is one thing, losing recreational activities (especially social group stuff) should be something we look at with concern. Not at the people, it's not their fault. But the fact they're having to, and what that means (not just for spending, but sure, for spending).

 

[amadeus]

wake up people

the whole world economy is going down the drain.

GWP will be higher this year than last. You are wrong.