Watching for Signs of an Economic Recession
Even though nobody’s said officially that we are in a recession, there are danger signs about that indicate that we could be headed for an economic recession. MarketWatch reports that some think that the economy is in danger:
‘The U.S. economy is now in the danger zone,” wrote Nariman Behravesh, chief economist for Global Insight. “Even a small shock will push the economy over the edge.”
But the article goes on to offer even more important and insightful information: things you can watch for in the economy. Here are the seven things MarketWatch says you can watch for so that you are well-warned in the event of an economic recession:
- Credit Markets. Since the credit market crash earlier this year, people have been wary of another possible crash. One thing to look for is the spread in interest rates. Another thing to realize is that lenders are becoming more choosy, due to credit market troubles, and that could mean fewer people pumping money into the economy.
- Capital. MarketWatch points out that whether companies are making profits — and what they are doing with them if they are — is important. Are companies investing in equipment? Capital investment puts more money into the economy, helping it grow.
- Oil prices. Look at whether oil prices are heading up. This can effect the economy, especially if there is little growth while inflation rises. Oil prices can be good indicators of this.
- Exports. How much are other countries buying from the U.S.? One thing that can help exports grow (bringing outside dollars to help the U.S. economy) is a weaker dollar. This makes American products less expensive and more desirable those in foreign countries.
- Housing. This is one of the biggies. When new home starts drop, and the number of homes on the market goes up, there is a problem. The housing problems aren’t over yet, and the ripples from the subprime lending crisis could continue through next year.
- Consumer spending. Is money going back into the economy from American consumers? This is an important thing to look at. But related to consumer spending is wage growth and the wealth of households. Home prices and values can play a part in this.
- Government intervention. While government intervention could help in some cases, but efforts so far have been fruitless. And “fixes” for the economy, like the mortgage rate freeze, aren’t really that helpful.
The bottom line is that you should be preparing your finances for a recession, no matter whether it comes or not. Being fiscally solvent is the best way to go. Then you are prepared for whatever comes.
Tags: economic recession, home values, home mortgage loan, mortgage blog,
signs recession, credit market crash, subprime lending crisis
While I hope that you are having a Merry Christmas, there are some things to consider this time of year, beyond presents given and presents received. Mainly it has to do with credit and debt. This time of year often sees well meaning people going further into debt (especially credit card debt) in order to buy presents and make the holiday special.