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Private Briefingwith WILLIAM PATALON III, Executive Editor
Aside from the continued sell-off in U.S. tech stocks, one of yesterday’s top financial news stories was the fact that U.S. inflation is accelerating – and at a pace that’s exceeding forecasts.
And the surge in food prices is one of the big catalysts…
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Don't worry about scanning headlines every day to determine the U.S. economy's chances of entering a recession in 2013.
We already know the answer.
Such indicators as gross domestic product (GDP), consumer spending, durable goods and exports all point to an economy not in a slow recovery, but on the verge of a 2013 recession.
That's because the trend lines, rather than showing gradual improvement, are moving in the opposite direction. The economy, after spending months with its head just barely above water, is about to go under.
The U.S. Commerce Department last week revised second quarter GDP sharply downward from 1.7% to 1.25%. The GDP was 1.9% in the first quarter of 2012. While we do not yet have any official data for the current quarter, a Federal Reserve Bank of Philadelphia survey of forecasters in August put the number at 1.6%.
That's an ominous pattern.
James Pethokoukis of the American Enterprise Institute explains: "Research from the Fed ... finds that since 1947, when two-quarter annualized real GDP growth falls below 2%, recession follows within a year 48% of the time. And when year-over-year real GDP growth falls below 2%, recession follows within a year 70% of the time."
There's actually a term for what we're experiencing: the "stall-speed economy." It's roughly defined as a period of two or more quarters in which the GDP remains mired below 2%.
And the headline GDP numbers only tell part of the story. All too many economic indicators are flashing a warning that growth will slow down even more.
Here are three pieces of the GDP that show how the economy is getting slammed from several directions:
In addition to the GDP data, there's plenty of other evidence pointing to a 2013 recession:
Even if such a tottering economy isn't quite weak enough to tip over on its own, all it takes is a little push from an external shock, such as the Eurozone debt crisis.
While recession 2013 may be inevitable, investors do have options - and time - to protect themselves.
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