Do manufacturing and construction crunches spell recession?
Posted by: in Stocks Money NewsFiled under: Economic data, Recession
A pair of economic reports today raise the question of whether the U.S. economy is experiencing negative growth this quarter. The Associated Press reports that construction spending fell to the lowest level in 14 years and that U.S. manufacturing contracted to its worst level in five years.
These reports don’t look good for the economy, but the question is whether these reports mean we are in a recession. That’s an open question because 70% of the U.S. GDP growth springs from consumer spending. That means that if consumers can keep finding a way to open their wallets — or more realistically — find new sources of debt, then they could offset the slowdown from manufacturing and construction.
The problem is that to the extent that manufacturing and construction slowdowns lead to layoffs of consumers, then there will be nothing to keep the economy from tumbling into a recession. So far, news of mass layoffs is not crowding the business headlines. But today’s reports could mean that such announcements will become more frequent in the next several months.
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