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How Bad Is the U.S. Economy?

By Michael Lombardi | Small Business

While I continue to hear politicians and the mainstream media tell me the U.S. economy is in a full-fledged recovery, I totally disagree with the notion.

I believe the truth of what’s going on with the U.S. economy is the total opposite of what we are being fed by both politicians and the mainstream media.

Look at the chart below of the change in the real U.S. gross domestic product (GDP) since the fourth quarter of 2011.

How Bad Is the U.S. Economy? image Real Gross Domestic Product Chart1How Bad Is the U.S. Economy?

If we were witnessing recovery, or a period of economic growth, would we be seeing the GDP collapsing? The rate of change in the GDP has actually been declining since the first quarter of 2012. This by no means should be taken lightly, as it indicates a recession may be following because economic activity isn’t flourishing.

In fact, I see even more indicators favoring a recession ahead.

Consumers in the U.S. economy are struggling—their pockets are getting emptier. Jobs are being created in the low-paying retail and service sectors. Meanwhile, prices for goods are increasing. Thanks to higher oil prices, I suspect prices for goods will continue to see an uptick.

Dear reader, current estimates of GDP growth are too optimistic—but this will change. Consider this: The Federal Reserve expects U.S. GDP to grow 2.3%–2.6% this year. Currently, in the second quarter, we are only running at an annual GDP growth rate of 1.7%. This is 26% below the Federal Reserve’s lower estimates. Will our economic activity jump by 26% for the balance of this year? I highly doubt it.

This all brings me to one conclusion: the effects of the money printing can only go so far. Eventually, its utility diminishes. I am not surprised to see the signs of a recession emerging while politicians and the mainstream sing a different tune.

The National Bureau of Economic Research defines “recession” as a period in which “a significant decline in economic activity spreads across the economy and can last from a few months to more than a year.” (Source: National Bureau of Economic Research web site, last accessed July 31, 2013.) Aren’t we experiencing this right now?

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