The big question is whether or not we are in a recession. The experts still haven't made up their minds, but if you ask the average consumer they will say without a doubt we are!
What is the definition of recession: a significant decline in 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. " GDP refers to gross domestic product, a common measure of economic output
So what is really going on. . . here are a few facts:
Investors fearful of a U. S. slump have driven down foreign stocks. Financial institutions overseas have admitted to large losses from bad bets on U. S. mortgages. The International Monetary Fund and others have warned that no region will prove immune to the spreading pain.
U. S. construction spending in January suffered its steepest fall in 14 years, the Commerce Department said a decline in residential building has spread to hotels, highways, and infrastructure projects paid for by state and municipal governments.
A survey showed U. S. factory output in February shrank for the second time in three months. The services sector, which has long eclipsed manufacturing as an employer, had fallen for the first time in nearly five years.
Manufacturing activity fell to 48.3 percent from 50.7 percent in January and 48.4 percent in December. Anything below 50 percent reflects declining activity.
Consumer confidence continues losing ground and is now at its lowest level in nearly 15 years.
Another startling figure is that employers have cut back on new hiring.
To help the sagging economy, the Federal Reserve has repeatedly cut interest rates since last September. In January, they slashed rates by 1.25 percentage points in just eight days.
Additionally, Congress and the Bush administration have launched a $168 billion bid to stimulate consumer and business spending.
Economists have warned that stagflation-a stagnant economy beset by high inflation-is very probable.
Business economists worry about mortgage defaults and heavy debt, which they described on March 3 as the greatest risks to the economy. They are increasingly concerned over the short-term risks associated with subprime mortgages and other forms of debt
Economic data no longer are needed to tell us a recession has arrived, said Warren Buffet.
"From a common-sense standpoint right now, we're in a recession, "
"With so few consumers expecting conditions to turn around in the months ahead, the outlook for the economy continues to worsen and the risk of a recession continues to increase. "
Consumer spending also has stalled. People are no longer willing to spend money unneccesarily.
Many economists have said they expect the numbers to get worse. What should you do in the meantime?
The best thing you can do during these tough times is to reduce your debt.
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