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Investing Specialists

Already in a Recession? Not So Fast.

The economy isn't booming, but recession-indicative metrics aren't in freefall, either.

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A couple of notable economists, including Lakshman Achuthan of ECRI, have recently indicated that they believe the economy may have already drifted back into yet another recession, and it will just be a matter of months before we realize it. The data we have today (although I caution these figures could be revised again) do not support that conclusion.

While many commentators define a recession as two negative quarters of GDP growth, the official statisticians look at four metrics: industrial production, retail sales adjusted for inflation, personal income less transfer payments (unemployment, disability, Social Security) adjusted for inflation, and employment. Most of the metrics are currently improving after hitting lower growth rates earlier in 2012. Only retail sales are in a clear downward trend, and that is largely because of falling gasoline prices, which is actually a good thing for the economy.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.