Are we in a recession yet? Well, not according to a few Chief Financial Officers, Two-thirds of CFOs predict a recession by the third quarter of 2020, according to the latest Duke University/CFO Global Business Outlook.
About 47% of the CFO’s surveyed by the outlook, said that they consider GDP growth to be one of the three most important indicators that they would look out for.
What does that mean for the average American?
The rule of thumb definition of a recession is two consecutive quarters of negative Gross Domestic Product (GDP) growth.
In a recession business activity slows down, unemployment goes up, credit tightens, inflation goes down amongst others.
Though the % change in GDP went up over the last few years, what has gone down (though still strong) is the personal consumption expenditure in 2018 went down compared to 2015, though still strong over the past 10 years since we had the 2008 crisis.
In 2018, American households spent $12.9 trillion. Sixty-five percent went toward services. The biggest components were housing and health care at $2.2 trillion each. After these essentials were covered, financial services were next at $856 billion. Americans spent $816 billion at hotels and restaurants. Other forms of recreation contributed $492 billion and transportation services contributed $424 billion. Non-profits provided $367 billion in services.
Americans spent more than one-third of expenditures on goods. They spent $2.9 trillion on non-durable goods, such as food, clothing, and energy. Durable goods totaled $1.7 trillion. They spent $517 billion on recreational goods, mostly consumer electronics. They spent $518 billion on automobiles and $382 billion on furniture. Here are the details:
So what are somethings to keep in mind when a recession approaches:
1. Keep 6 months worth of emergency funds. Companies are not immune to the recession and layoffs are common. Have a plan in place.
2. Keep track of your spending
3. Plan your investment strategy. If you are close to retirements look at investing in a fixed income investment option
4. Tackle your debt now. Take care of your debt now while you have a job
With signs showing a recession likely in 2020 I will certainly keep track of my assets and the market data to see where the gross domestic product data is headed.