Don’t Get Blindsided: 12 Economic Alarms Pointing to a Looming Recession

Join 34,000+ Traders & Investors by getting our FREE weekly Sunday Cheat Sheet email. Get key market news and events before everyone else. Click Here to See if you Qualify.

The global economic system experiences periodic cycles of growth and contraction. As individuals and businesses navigate these economic fluctuations, it becomes crucial to identify early warning signs of a potential recession. This article highlights ten key indicators that suggest we may be on the brink of an economic downturn. Experts’ views on the severity and the timing of the recession vary. However, indications or signs indicate that the country is headed for recession. These signs include:

Inflation 

Inflation indicates that a recession is likely to occur in a country. In a country like the US, where consumer spending is one of the biggest drivers of the economy, an increase in prices of essential commodities and utilities combined with no growth in consumers’ income will likely slow down their consumption rates, adversely affecting the economy.

Low Consumer Spending 

If overall consumer spending slows down, a recession is likely to occur in the future. This is one of the clear signs of a recession on the horizon. Consumers generally slow down on spending if they lose their employment, think the job market is terrible, or their work hours are cut down. Another reason for low consumer spending is the higher prices of items and services caused by inflation. Consumers lower their spending to increase their savings rate.

A Contraction in the Gross Domestic Product

Gross Domestic Product or GDP is the metric used to measure a country’s economic output or the market value of goods and services. Consumer demand and spending play some of the most critical factors in calculating the GDP. If a country’s GDP declines, it indicates that a recession is likely to occur.

Increase in Unemployment

Another clear indication that a country is headed for a recession is the increase in unemployment rates. The spike in unemployment can occur when companies, organizations, etc., reduce their workforce due to an adverse economic event or situation. The beginning of a recession is marked when there is an indication that the national unemployment rate in a country has increased by 0.50% or more across three months or if the rates are lower than they have been in the last year.

Low Manufacturing Activity

Manufacturing of all kinds of goods encounters low activity when there is a reduced demand for goods from the general public. This can occur due to inflation and low consumer spending, which all together indicate that a country is likely headed for a recession. The low manufacturing activity increases the prices of finished goods, which further results in low demand from retailers and consumers.

Fall in Personal Income

An economy likely headed for recession results in reduced hours of employment and job losses. Once an individual’s income fails to meet the basic standards, they cannot spend on goods and products. In addition to the decrease in personal income, the rise in inflation also hinders an individual’s ability to spend even on necessities and groceries.

Inverted Yield Curve

A yield curve is said to be inverted when the long-term interest rates drop below short-term interest rates. Once a yield curve is inverted, it suggests that the market lacks confidence in the economic prospects. An inverted yield curve is one of the more reliable signs or warnings of an incoming recession.

Volatility Index

The volatility index, or the VIX, was introduced by the Chicago Board of Options Exchange to help investors measure the different levels of fear, stress, and risk the market showcases. If the VIX values are greater than 30, it is an indication that there is an increase in volatility in the market. A high-value VIX indicates that a recession can occur anywhere shortly.

Low Industrial Output

When a country undergoes a downturn, most companies and organizations reduce production to minimize risk. This significantly impacts the number of required goods, resources, materials, and labor, which all further impact sales and lead to an increase in unemployment and layoffs. These low industrial outputs and low sales have a domino effect which leads to clear signs of a recession likely occurring in the country.

Tight Credit Conditions

Once a bank’s willingness to provide loans gets tightened, a recession will likely occur in the country. As the credit conditions in banks tighten or turn negative, consumers and financial and banking institutions are being negatively impacted. Surveys that track a bank’s willingness to lend have flashed warning signs as the lending and credit conditions in the country show signs of an oncoming recession.

Interest Rates

Another sign that a country is headed for a recession is an increase in interest rates to deal with rising inflation. As inflation and interest rates rise, a recession is bound to occur.

Fall in Investments

If organizations and people invest less, it could mean they have less money to invest or want more cash in hand because they are afraid of a bleak future. Investors are more cautious of their investments because of the other signs that the country is headed into a recession. As investment rates fall in the country, businesses are affected, resulting in the domino effect that ultimately leads to a recession.

Profitable Stock Traders are Using This Tool to “Hack” the Markets

This tool is helping traders beat the market compared to those who have no idea what is. Here are the Top 28 Stock Trading Discord Servers Right Now.

10 Industries That Will Make The Most Millionaires In The Next 5 Years

If you are not paying attention to these 10 industries, you are about to miss out on the next boom of millionaires. See the 10 Industries About to Make the Most Millionaires in the Next 5 Years.

8 Cryptos Set to Shoot to the Moon in 2023 – One Small Investment, One Giant Leap for Your Wallet

These are 8 cryptocurrencies you need to know about before you miss out on the next boom. 8 Cryptos Set to Shoot to the Moon in 2023 – One Small Investment, One Giant Leap for Your Wallet

10 Stocks in Bill Gates Stock Portfolio Smart Investors are Buying

We share the top 10 stocks that Bill Gates owns that smart investors are buying right now. 10 Stocks in Bill Gates Stock Portfolio Smart Investors are Buying

The best investors are always learning. YouTube is one of the best free resources to learn from experts. Here are the top 28. Top 28 Best Stock Market and Investing YouTube Channels Right Now

Top 6 Personality Traits Of Highly Successful Investors And Traders

From Warren Buffett to Ray Dalio. We breakdown the top 6 common traits the most successful investors and traders have. Top 6 Personality Traits Of Highly Successful Investors And Traders

 

This Options Discord Chat is The Real Deal

While the internet is scoured with trading chat rooms, many of which even charge upwards of thousands of dollars to join, this smaller options trading discord chatroom is the real deal and actually providing valuable trade setups, education, and community without the noise and spam of the larger more expensive rooms. With a incredibly low-cost monthly fee, Options Trading Club (click here to see their reviews) requires an application to join ensuring that every member is dedicated and serious about taking their trading to the next level. If you are looking for a change in your trading strategies, then click here to apply for a membership.