Based on the latest polls, Americans are currently super negative in their outlook for the US economy just ahead. A majority expect a recession before the end of this year. Over three-fourths believe the country is headed in the wrong direction.
The mainstream media is fomenting this negative attitude about the economy and things in general, which I continue to find surprising since they have their man in the White House and Democrats control both houses of Congress. You would think the media would be touting how good things are right now, but most reporting has a negative overtone and fears of recession.
The Biden administration is trying it’s best to push a positive narrative on the economy, based primarily on a record number of new jobs created since Joe took office. While this is true, the American people are just not buying this rosy outlook. The prevailing outlook is very negative.
For reasons I don’t fully understand, the public’s attitude on the direction the country is headed is about as negative right now as we’ve seen it in a long time. Take a look at the latest findings from RealClearPolitics.com’s survey of seven different major polling firms.
Direction of Country: Right Direction Or Wrong Track?
Over 70% of Americans polled believe the country is headed in the wrong direction versus just over 22% who believe we are on the right track. This is quite surprising since we just came off the strongest economic rebound in decades last year as the economy recovered from the Covid-19 recession – with GDP surging 5.7%.
While GDP did decline at a 1.4% annual rate in the 1Q of this year, surveys of economists expect GDP growth of 2%-3% for all of 2022 on average. If these forecasts turn out to be accurate, there is no reason for Americans to be so negative about the economy this year.
Source: Commerce Department
Despite that, surveys as recent as last week found that a majority of Americans expect a recession this year. I find that unusual since the economy grew at the strongest rate in decades last year, and yet a majority of Americans now expect a recession this year. This just doesn’t make sense to me.
A recession is defined as two or more consecutive quarters of negative Gross Domestic Product growth. GDP is measured and reported by the Commerce Department. The advance estimate of 2Q GDP will not be released until near the end of July.
If that number is negative, it will mean we have had two consecutive quarters of negative GDP growth, and economists and forecasters will conclude we are indeed in a recession. On the other hand, if the advance estimate of 2Q GDP is positive, you can expect this widespread talk of a recession to decline significantly.
There is also the possibility the Commerce Department will revise its latest estimate of 1Q GDP from -1.4% to a positive number next month when it releases its advance estimate of 2Q GDP. I’m not predicting this will happen but the advance estimate of 2Q GDP will include a revision of 1Q GDP, and it will likely change from the most recent estimate of -1.4%.
If the advance report on 2Q GDP in late July is positive and the Commerce Department revises its estimate of 1Q GDP to a positive number, then all this talk about a recession this year will likely disappear. Again, I’m not predicting this will happen but if it does, it will be interesting to see how the financial media reacts to the good news.
Until we get the advance estimate of 2Q GDP, you can expect talk of a recession to continue.
Our last recession, the so-called Covid-19 recession, occurred from February 2020 to April 2020 when the economy shrank by 19.2%. While it was brief, it was severe. The prior recession occurred from December 2007 to June 2009 and it included the financial crisis when many thought the economy was headed for a new depression.
To sum up, the period between now and late July will be an interesting time for investors. Currently, the financial media is convinced we’ll get another negative GDP number for the 2Q, which will mean we are indeed in a textbook recession.
On the other hand, if the advance estimate of 2Q GDP comes in positive, expect this widespread talk of a recession to subside significantly. It’s too early to know what the pre-report consensus among forecasters will be for the late July advance report on 2Q GDP, but it won’t surprise me if it is a positive number.
I’ll keep you posted as we get closer. In the meantime, keep your seatbelts fastened.
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