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Are we still in a recession?

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Are we still in a recession?

David Katz at CFO.com suggests that viewed from the perspective of cash flows generated by American companies, we are.

“If you look at the economy through the lens of the cash flow of corporate America, we’re still stuck in a recession.”

Such is the interesting conclusion of David Katz, writing at CFO.com recently, after reviewing research from the Georgia Tech Financial Analysis Lab regarding US corporate cash flows in the third quarter of last year.

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The basis for this conclusion is that, ultimately, cash flows “tell the tale” when it comes to the health of the economy.  While, as Katz points out, the standard way of measuring recessions is based on GDP, employment and income, those measures may not really reflect the reality of the economy’s health.

"There won’t be any improvement in the U.S. economy — especially not increases in hiring — “until we start seeing improving revenue growth, which just isn’t there.”

Since reaching the all-time highest measure in the lab’s data set at $788.5 million in December 2012, median company revenues have fallen 10.6 percent to the most current figure of $705.3 million. That drop in median sales, accompanied by declines in such things as capital spending and outlays for inventory, “are similar to developments observed during the recession,” according to the report. “The third-quarter data do not imply a strong and strengthening economy.”

There won’t be any improvement in the U.S. economy — especially not increases in hiring — “until we start seeing improving revenue growth, which just isn’t there,” says Charles Mulford, the lab’s director and a Georgia Tech accounting professor.

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