Possibly, if those who closely follow the pulse of the global economy in general and the US economy in particular are right, the economy of the planet’s giant is already in recession.
Last Thursday several economic experts spoke and explained why, from their point of view, the United States is probably already in recession, but does not know it, or at least its best-known data could reflect a different situation.
Why is the US already in recession?
The post-pandemic era is still turbulent, especially in terms of numbers and/or data related to the economy.
According to experts, the phenomenon distorted practically everything in the world, and that includes macroeconomic figures and how to interpret themsome data may show disconnections that were not previously present between data.
Under this circumstance, in the United States something of the previously described happens with the data of the Gross Domestic Product (GDP), compared with an indicator that is theoretically equivalent, we refer to Gross Domestic Income.
In the first case, the available figures indicate that the US economy is solid, that it has withstood “firmly”, as we say in Mexico, the storms recorded so far in the post-pandemic era.
By contrast, the second indicator already reflects two consecutive quarters of contraction.
The Gross Internal Income, or Gross National Income, is the set of all the remunerations of all the economic sectors; in other words, is what is charged for what is produced: workers’ salaries, employers’ profits, rents, interest and dividends obtained from money invested in public or private debt securities, shares, bank deposits, investment funds, etc.
With two consecutive falls in gross domestic income, it would mean that the United States would be in a technical recession, but without “noticing it”, at least so far.
The revised GDP for the first quarter of the year in the US economy shows a preliminary figure of 1.3 percent, a slight improvement over the level of 1.1 percent reported in the first reading, although far from the 2.6 percent registered at the end of 2022. There is a clear slowdown, but the economic giant’s GDP remains in the positive zoneeven an additional momentum is observed.
But the media and many experts around the world did not pay attention to the revised quarterly data on Gross Domestic Income, which usually does not appear in the preliminary estimate.
This indicator fell 2.3 percent annualizedafter falling 3.3 percent annualized in the last quarter of 2022with which it linked two quarters in the negative zone.
The contrast is evident: in the last two quarters, real GDP shows that the world’s largest economy expanded by close to 1 percent, very close to its potential growth; but on the other hand, the Gross Internal Income reflects a contraction of 1.4 percent, which in fact and according to the experts, means a “moderate recession”.
With these figures, experts point out that the US economy would have already entered a recession “without realizing it”.
According to classical economic theoryboth indicators should mark the same trend and register very similar figures.s, but the reality is that while GDP continues to show relative strength and advances, Gross Domestic Income is in the opposite direction.
Several of the experts who have detected this “anomaly” try to explain the above pointing out that, while GDP on the demand side is based on spending (consumption, investment, etc.), Gross Domestic Income, also known as GDP on the income side, is based on wages, taxes minus subsidies on production and imports, that is, net taxes, company profits and gross mixed income, all indicators that are already in clear slowdown, or even in decline. recoil.
According to the theory explained by the experts, both indicators should be the same or very similar, because everything that is produced ends up becoming income.
Therefore, in GDP on the income side, the same amount should be reached.
If there is such an obvious divergence, there is no more, it is called a recession.
What happened is that very few have taken into account this alternative indicator to the “traditional GDP”, which in fact is more than alternate, it is parallel.
Other experts reach the same conclusion pointing out that if both indicators are averaged, the US economy has already contracted in two consecutive quarters and in four of the last five.
That is why we already have recession in mind, it is already among us and in the largest economy on the planet, but few have realized it, or outright “it happened to them at night.”
And there is a recession because, according to expert accounts, the average GDP and Gross Domestic Income stands at minus 0.5 percent annualized in the first quarter of this year, which is added to the negative rate of 0.4 percent for the quarter. previous.
Besides, historically when GDP on the income side falls, a recession is imminent; in fact, a recession has never been avoided when such a phenomenon occurs.
According to historical data, the last time this discrepancy between indicators occurred was before the subprime crisis, and something similar was previously recorded in the early 1990s.
In this scenario, the most optimistic and “soft” analysts with the largest economy in the world point out that the United States is already in a very slight recession or that it is entering it.
Others, however, point out that there is already clear evidence that the United States is already in recession, but has not yet realized it.
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