Signs That a Recession Might Be Coming
There are several signs that can hint a recession is on the way. Here’s what to look out for:
Falling GDP: If the economy's Gross Domestic Product (GDP) shrinks for two quarters in a row, that's a big red flag. This means the economy is not growing and can fall below zero percent.
Unemployment Rates Rising: If more people are losing their jobs, and the unemployment rate goes above 6%, that usually means the job market is getting weaker.
Less Consumer Spending: When people spend less money, especially if retail sales drop by 0.2% or more, it’s a warning. Consumer spending makes up about 70% of the GDP, so this is really important.
Lower Business Investment: If businesses are investing 0.5% or more less than before, it shows they are feeling less confident about the economy.
Inverted Yield Curve: This sounds complicated, but it just means that short-term interest rates are higher than long-term rates. Historically, this kind of situation has come before a recession, usually about 12 months before.
High Inflation Rates: If inflation is over 3%, it can make things more expensive, which means people can buy less with their money. This can slow down the growth in the economy.
Keeping an eye on these signs can help us understand what might happen with the economy in the future!
Signs That a Recession Might Be Coming
There are several signs that can hint a recession is on the way. Here’s what to look out for:
Falling GDP: If the economy's Gross Domestic Product (GDP) shrinks for two quarters in a row, that's a big red flag. This means the economy is not growing and can fall below zero percent.
Unemployment Rates Rising: If more people are losing their jobs, and the unemployment rate goes above 6%, that usually means the job market is getting weaker.
Less Consumer Spending: When people spend less money, especially if retail sales drop by 0.2% or more, it’s a warning. Consumer spending makes up about 70% of the GDP, so this is really important.
Lower Business Investment: If businesses are investing 0.5% or more less than before, it shows they are feeling less confident about the economy.
Inverted Yield Curve: This sounds complicated, but it just means that short-term interest rates are higher than long-term rates. Historically, this kind of situation has come before a recession, usually about 12 months before.
High Inflation Rates: If inflation is over 3%, it can make things more expensive, which means people can buy less with their money. This can slow down the growth in the economy.
Keeping an eye on these signs can help us understand what might happen with the economy in the future!