In economics, a recession is an economic cycle recession when a generalized downturn in economic activity is noted. Such recessions tend to occur when there's a widespread decline in aggregate spending. The spending cuts usually come in the form of retrenchment, which lowers all economic activities. Thus the economies tend to contract. For a recession to formally end, three essential indicators need to be confirmed: unemployment, economic growth, and price inflation.
Consumer confidence is one of the important indicators for recession. In simple terms, consumer confidence is the opinion of consumers on current economic activities. If consumer confidence continues to drop, then this means that spending is declining at an alarming rate. Given that consumer confidence is closely related to overall spending, a recession can only be perceived as an economic problem when a majority of consumers are saying that they are under pressure financially. This, however, shouldn't deter you from taking out loans given that it's a fact that overspending is actually good for economies and helps to strengthen the economy.
Consumer spending accounts for about 70% of gross domestic product (GDP). Therefore, if consumer confidence continues to decline, then the slowdown in economic growth will eventually hurt the economy. Consumer confidence is also related to other factors such as income, employment and spending habits. It was during the three years prior to the start of the recession that spending growth was considered to be above average.
During the first two quarters of this year, the job situation in the US was very fragile. According to the Bureau of Labor Statistics, there are only six months that have been consistent employment gains. In fact, during the first six months of this year, there were more unemployed people than those who are employed. As unemployment numbers continue to rise, the pressure on the authorities will only increase. Thus, we may not see any positive economic growth for the next six months.
If you wish to invest in the stock market, do so only if you want to see some positive results after the recession. Even though there are some signs of recovery, there are still many indicators that point to a recession. You should therefore wait for official economic indicators released by agencies before buying stocks. Most stock brokers will advise their clients to wait until the recovery indicators become stronger. Most investors agree with this view, citing the fact that it is much better to wait for the recession to be over before buying stocks again. The chances of seeing any substantial recovery are . . . . . . slim to none considering the current state of the economy.
There are many people who claim that stock market investors are overreacting to the recession. They point out that real estate investment has declined much since the onset of recession. However, stock market investors can't expect to see continued economic growth anytime soon either. Hence, they are advised to wait for normal economic growth indicators before they decide to buy back stocks that have decreased in value.