Global Recession? The world economy is going through rough patches right now. From the fall of the Chinese stock market to the United States’s unexpected move to raise interest rates, businesses around the globe are seeing their profits and sales take a hit. Despite these setbacks, there’s also plenty of reason to be optimistic about the coming months and years as well.
There are several indicators that point to an upcoming economic downturn in the near future, but not necessarily a full-blown recession. If you’re worried about your personal finances in this scenario or know someone else who might be, read on for six clear signs that point towards a recession down the road.
Interest Rates Are Starting To Rise Again
With the Federal Reserve starting to reduce its balance sheet and the U.S. economy looking a bit weaker than expected, the central bank has begun to hike interest rates again. This is a sign that the economy is improving and companies are more confident. But while the Fed is hiking rates, they’re also continuing to reduce the size of their balance sheet.
This mix of tightening and more rate hikes is a good sign that the economy is getting back on track. But it’s also a sign that the Fed is getting ready to reduce their balance sheet and bring rates down again. If interest rates keep rising in a steady but noticeable way, you should be more optimistic about the economy’s future.
Unemployment Is On The Upswing
The Fed is hiking rates and reducing the size of their balance sheet and the U.S. economy is looking a bit stronger. But all of this comes with one big downside: unemployment is rising. In fact, the Department of Labor reported that unemployment rose to 4.6 percent in the most recent month, putting it at its highest level since August of 2008.
This isn’t necessarily a bad thing either. After all, higher unemployment often means that more people have jobs and are earning more money than they were before. If you’re looking for a sign that the economy is improving, this is a good one.
Stock Markets Are Falling Again
After rising for years, the stock market is now starting to fall. This is a sign that investors are growing nervous about the future and trying to protect their wealth. It also usually happens when confidence in the economy is waning. And in the United States, it all comes with a side note: economic growth.
Stock markets are falling because the government recently announced that the economy is growing at a measly rate of just 1.4 percent. This is a sign that the economy is slowing down and investors are worried about the future.
There’s A Tightening Credit Market
While stocks are falling and unemployment is rising, one good sign is that credit markets are becoming a little tighter. This is because when people put money up as collateral to get loans, they’re not getting as high of a rate of return. And when credit is easy to come by, it means that people are borrowing more money.
The combination of falling stock markets and rising unemployment is a sign that credit markets are becoming more difficult to borrow money in. This is a sign that the economy is slowing down, but it’s not a bad thing.
Consumer Confidence Drops
When interest rates are rising again and the stock market is falling, it’s not hard to predict that consumer confidence is going to drop as well. Consumer confidence is a good indicator of how consumers feel about their finances and their future.
When confidence falls, consumers might start to pull back on spending, which can have a domino effect on the economy. Consumer confidence is a good sign because even when the economy is struggling, people still want to buy things. But when confidence drops, consumers might start to think twice about spending money.
Weird Things Start Happening In The Economies Of Key Nations
This one is a little more subtle. When consumer confidence drops, people start to pull back on spending. But when they do so, they also start to be a little more careful where they spend their money.
This is a good thing, but it can also mean that certain industries are going to suffer a bit more than others. For example, when consumer confidence declines, people start to be a bit more cautious about spending money on vacations. This means that travel companies see a bit less sales than usual.
A recession isn’t necessarily a bad thing and is an inevitable part of a healthy economy. Still it helps a lot to be prepared to go through it smoothly and come out on the other side with no major financial hit to you or your business.