Is the economy slipping again?

Date posted: February 22, 2013

A recent government report showed the economy going in reverse at the end of last year. N.C. State University economist Mike Walden considers whether we are in danger of heading into another recession.

“The so-called GDP report, gross domestic product, showed on an annual basis that in the fourth quarter of last year we retreated by .1 percent, not a lot, but it was a negative number – raised a lot of eyebrows because we had grown by 3 percent in the previous quarter.

“So there is some buzz about, gee, does this mean we’re headed into another recession, because actually when GDP goes down, that is the classic definition of a recession. Many economists — and I’m included in this — think not so much — that there (were) some special factors that were going on in the fourth quarter. We had Hurricane Sandy, which obviously put a big crimp in the northeast economy.  We also had a big drop in defense spending.  And then finally what we saw was that businesses rather than buying and building new products and services to sell, they sold out of their inventory.  So there was what we call inventory depletion.

“And many economists think these are temporary factors. So, I still think when I look at the economy and I look at things like better housing market, better household finances, that the fourth quarter was an aberration — that we’re still on track to grow somewhere between 2 and 2.5 percent in terms of this GDP number, which translated in the job mark means we’re probably going to create enough jobs to continue to see a slight drop month to month in the unemployment rate.”

 

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