Some economists are floating the theory that the economy is in a stall rather than a recession. The answer depends on which set numbers you consider.
We all know that Gross Domestic Product (GDP) has contracted for the past two quarters. As such, a classic definition would state that we’re in a recession, but this isn’t the only way that the economy is judged.
There’s another measure named Gross Domestic Income (GDI) which tells a mildly different story.
GDP is a measure of spending. Whenever you spend money on something, it’s supposedly captured in the Gross Domestic Product Model.
GDI is the income side of that equation. It’s a measure of the businesses that collect those payments. In theory they should be exactly the same, but there’s a lag given the timeliness factor.
While GDP has contracted by 1.1% in the past two quarters, GDI is still positive by an annualized rate of 1.6%. This means that whether or not we’ve recessed depends on who you speak to and what measure they use.
Many economists average the two which would bring us to a positive.2% rate of growth. This would mean that our economy’s growth is so anemic, that we’re actually in a stall.
Let me leave you with this.
However you slice, dice, chop, or mix it, the economy isn’t great.
I wanted to present the other side of the coin. Many accuse me of being overly pessimistic at times, and my job requires me to always look at the bad that can happen so I can protect my clients.
So here’s the optimistic side for a bit of a change.
That being said, if our growth is .2% rather than -1.1%, I don’t know how that would change any advice. Inflation is still growing out of control, and we still need to watch our businesses like a hawk.
Know your numbers. Know your break-even points. Know what profits you need to take home every month. And know that you need to recompute those numbers on a monthly basis with your monthly financials, because they’re going to change drastically over time.
Whether we’re in a recession or a stall, the job of entrepreneuring is still difficult. Stay on top of it, and you’ll be fine.
*Words from our exceptional leadership
