How The Recession Of 2023 Begins
Remember when no major figure would admit the U.S. was in a recession?
It was beyond suspicious.
The definition of a recession was met.
Real GDP declined for two straight quarters.
Were they hoping for a turnaround?
Some change in economic trajectory without any significant policy reverse also drive it?
A cynic might say if they won’t admit it, they’ll never admit it.
But it’s probably much worse than that.
And today we got confirmation of why they wouldn’t admit it, where the economy is headed next, and how the recession of 2023 is going to play out.
The Bottom Line(s)
Today’s GDP report strong.
The official GDP grew 2.6% annualized.
The reaction was good too.
CNN declared, “The US economy bounced back…”
CNBC noted, “...Traders cheer stronger-than-forecast U.S. economic growth data.”
The official White House statement said, “Today we got further evidence that our economic recovery is continuing to power forward.”
Stocks are up too.
All seems well.
But if you’re paying attention, you know it’s not.
The GDP report actually points that out if you look beyond the headline number.
The majority of the rise in GDP came from trade.
The Bureau of Economic Analysis says that, “The increase in exports reflected increases in both goods and services. Within exports of goods, the leading contributors to the increase were industrial supplies and materials (notably petroleum and products as well as other nondurable goods), and nonautomotive capital goods.
In other words, oil and natural gas made up a huge part of GDP.
But that’s naturally a top performer given where oil and natural gas prices are around the world.
The U.S. economy that’s trading and wealth creating is stuck in the gutter.
Ben Casselman of the New York Times pointed out, “Final sales to private domestic purchasers” rose 0.1%
That right there is meh.
But it gets worse went you get to housing.
The Calculated Risk Blog, a great source for all economic data, pointed out that, “Residential investment decreased at a 26.4% rate.”
That’s staggering.
The industry sees what’s coming for housing prices and they’re getting ready for it.
Here’s why it matters now.
The Blame Game And Only Way Out
Don’t get sucked into today’s euphoria.
Stocks will go up and down.
They could do extremely well as the Fed merely lightened up on the interest brake alone.
But they’ve set everything up perfectly.
And it’s why we go back to our opening question about no major public figure admitting a recession is here.
An election is a few weeks away and Washington will get shaken up in a big way.
When 2023 hits and the current trends run even deeper into clear and obvious recession, an official recession will be
declared.
Then it’s all about blame.
That’s just a prediction and it could be wrong.
But it won’t be.
The only way it won’t is if energy policy is changed.
Unleashing energy production would cut inflation in half, spark a rebound in consumer spending, spur business investment, and get everything rolling again.
There’s hope.
But as an investor, you can’t bet on hope.
You’ve got to see real change in oil and energy production and then jump in big for a major recovery.
Otherwise, the downtrend will resume.
