Do You Think We Are In A Recession?
IÂ´ve been doing a bit of reading lately into this subject of â€œRecessionâ€™. That is the word we hear just about every day from the newspapers, friends, our financial advisors and government. There is a â€œculture of pessimismâ€™ being communicated from our national and industry leaders that give us the impression that dark times lay ahead (I kind of fell into the trap of just repeating what I heard too).
Well, letÂ´s take a closer look at what the facts are:
LetÂ´s define what a recession is. The official definition of recession is when GDP growth is negative for two consecutive quarters or more. However, you can feel like you are in a recession before it has officially started because it is usually preceded by several quarters of slowing but positive growth.
What is GDP? The term “GDP” is short-hand for the Gross Domestic Product. This is the total value of all of a country’s goods and services that were produced in a year.
So, for there to be an â€œofficialâ€™ recession then we must have the first 2 quarters of 2008 be negative GDP growth. If we look at the statistics then we will see that the 1st quarter final GDP was 1%. That was positive. The 2nd quarter preliminary GDP was 3.3%! Well, how can we be having a recession when the GDP figures keep going up? By the way, the 4th quarter 2007 final GDP was .6%–An upward trend. Hmmâ€¦seems confusing.
So what definition of recession are they using? The facts donÂ´t support the official definition of recession. However, the NBER (National Bureau of Economic Research) defines as recession as “a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” For July, 2008 real income drop p ed for the first time. Unemployment rose from 4.9% to 5.3% from the first to the second quarter. Industrial production was up 2% in June, 1% in July and finally down 1.1% in August. Wholesale-Retail sales were down slightly in June after month after month of positive growth, with July being higher. So, the current economic indicators show that we MAY BE, POSSIBLY, UNCERTAINLY in a recession by this much more subjective definition. And if we are, then it has been within the last month, not over the last year or so as has been touted by the authorities.
The moral of this story is not to believe everything you hear. Recession itself as a term causes upset. ItÂ´s thrown around by people who should know betterâ€”unless they have an agenda in scaring the hell out of you and assisting you in making decisions that arenÂ´t in your best interest. You decide.
This situation will continue until it ends. In other words, it’s like a forest fire. It will burn until it stops burning. It may get worse in the short term and it may not. I really don’t know. But either way, we can choose to wait or we can act. We can’t control what Congress will do or the regulators, but we can control what we personally do.
The way to survive this economic environment is to produce and promote like crazy. Flourish and prosper despite all of the economic suppression and false data. Take a portion of what you earn and buy long-term investments in the stock market. It is on sale and could be valued today 40% off of its real value (according to Brian Wesbury, a top economist). But do it now because waiting until we all feel better will be too lateâ€”the real investors will have already enjoyed the gains.
P.Christopher Music is the President of Wealth Advisory Associates, a Registered Investment Advisor. He is a licensed life, health and annuity insurance agent, a certified business consultant and financial advisor who works with chiropractors and a variety of professional practices and small businesses. www.WealthAdvisoryAssociates.com.
He can be reached at 727-588-1540 or by e-mail at Christopher@waahome.com.