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These economic indicators allow us to figure out whether the economy is going to boom or go into recession and based on the information, we can decide our investment strategies.
Recession indicators are also economic indicators that allow us to see that the economy is heading into a downturn. When the GDP is in negative for two consecutive quarters, we can conclude that recession is setting in. However, the official judge of when recessions start and end is the National Bureau of Economic Research (NBER). The take into consideration the following recession indicators to determine whether recession is starting or ending:
- Industrial production
- Payroll employment
- Inflation adjusted personal income
- Volume of sales in manufacturing and trade sectors
Usually the NBER takes nearly 6 months to recognize the recession indicators and to announce it. Since recessions usually last 6 to 18 months, the recession could be potentially over by the time NBER makes an announcement of a recession based on the indicators.
That is why economists study other recession indicators to see when the economic slump starts and they are as follows:
- Slower consumer spending
- Impending drop in interest rates
- Rising unemployment
- Prices of goods like food, gas and clothing rising faster than wages
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