Financially Spracking: If it walks like a duck and quacks like a duck, then it is probably a duck
Representatives from the
And technically, they are correct as the
In addition to the subjectivity of the above statement, the specific criteria the NBER uses in determining exactly what constitutes a recession is only known to a few. Moreover, the NBER quite often determines if a mild recession has occurred only after it has passed.
The reason for the debate is given the fact that the NBER has not made public the specific criteria used in determining exactly what constitutes a recession, economists, as well as others, have made their own definition, that is two consecutive quarters of negative growth in the economy as represented by Gross Domestic Product (GDP), released by the
Several components to the economy negatively impacted second quarter GDP, namely the purchase of both durable as well as nondurable goods, residential and business investment, a decrease in inventories as well as weak government spending.
In addition to the weakness in the data noted above, what struck us as most telling was contained within the update provided by Walmart for their second quarter and fiscal year 2023. This stated that "comp [comparable] sales for
Food inflation is double digits and higher than at the end of Q1. This is affecting customers' ability to spend on general merchandise categories and requiring more markdown to move through the inventory, particularly apparel."
Walmart CEO
Toward the other end of the spectrum are customers of
Due to the level of inflation for necessities exacerbated by the imbalances in the supply chain along with, up until recently too easy of a monetary policy, we would define this economy as one that is weakening and perhaps either having just entered or on the threshold of a mild recession.
However, it is one that the stock market has mostly priced in. That said, should the Fed continue to pursue a policy that seeks to equalize the supply demand equation on those that are already seeing their purchasing power shrink, then the recession may be more severe. That is precisely why, at this time, after having just increased the federal funds rate by another 0.75% this past week, we believe the Fed should raise interest rates by only 0.25% at their upcoming meeting in September and then take a wait and see attitude.
Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that
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