The world economy is finely balanced, and it can be compared to a living, breathing being in the complex ways that it works. If they go out of whack, many things can have a devastating effect on our economies, and some signs can warn you of these potential events.
Understanding what to look for can give you a heads up when the economy is moving into recession and help you prepare a little better for it. Below are some warning signs to look out for that can help you predict the chances of the next recession starting.
Credit Defaults Increase
When you see the number of companies and private individuals who default on their debts increase, it is a warning sign that we may be going into recession. Too much credit growth can lead to too much confidence in the market, and people stretch themselves beyond their comfort levels. It does not need to take much in these situations for you to be unable to repay your debts as your outgoings exceed your income.
The Number Of People Without Jobs Increases
You will also need to tread carefully when you see the unemployment numbers steadily increasing, which is another warning sign we are heading towards a recession. When economies slow down, many businesses start to worry, and they will usually begin laying people off. Until there is stability and confidence in the marketplace again, people can struggle to get new jobs, so you need to pay attention to these figures.
Massive Fuel Price Increases
The cost of fuel is always a worry, and there can come sudden increases in price due to lack of supply which can have a significant effect on our economy. When you have a negative supply shock, the availability of the fuel decreases, which pushes the price higher quickly. When the fuel cost goes up, it hits everyone, not only those with vehicles, as the prices of services and consumer goods will increase, raising inflation levels even more.
Demand For Gold Increases
When economies are heading into a recession, you will also see that the demand for gold will increase. People are cashing in other investment vehicles they may use and purchasing gold to help safeguard their wealth against inflation. You may wish to consider investing in gold yourself or even in other precious metals. Apart from gold, you may also want to buy silver bullion Adelaide dealers are offering at a price lower than gold.
Rising Interest Rates
You can also see interest rates going up when the economy is slowing down and heading into recession, which is not good news for people with a mortgage. Controlling interest rates is vital to keep a healthy economy but if they increase too quickly, it can have a negative effect on the economy.
These are a few warning signs we might be heading into a recession, but there are more besides these few. There is plenty of information freely available on the internet that you can use to help you better understand the nuances of economics and maybe spot a recession on the horizon and prepare yourself financially for it.