As stocks plummet again on Wall Street for the 2^nd straight day among fears that a recession may be closer then originally perceived, I thought it might be interesting to take a contrarian look at what the effect of a recession may have on the average consumer.  Some of you may not know that a recession is actually determined “after the fact” by the National Bureau of Economic Research which means that if we are in a recession, we probably won’t know about it for another couple of months. In simplest terms, a recession is defined as a decline in business activity. This is often defined as two consecutive quarters with a real fall in gross national production. 

Last week’s Labor Department report, which showed that the U.S. economy lost jobs in January for the first time in more than four years, was the first major indicator that things might not be rosy with the US economy.  Add that bleak news with today’s release from the Institute of Supply Management that the service sector of the United States (which accounts for about 2/3 of our economy) actually contracted in January for the first time in four and half years and a troubling trend does seem to be developing.

So what does this means for the average consumer?  Well surprisingly, a recession can benefit the average consumer in many ways.  Take a look at these five ways you can benefit from a US economic slowdown:

Cheap Stocks:  Bell weather stocks like Coke (KO), Phillip Morris (MO), McDonalds (MCD) and Proctor & Gamble (PG).  No matter how bad things get, consumers always find the money for their cokes, cigarettes, hamburgers and toothpaste.  All are great recessionary buys for even the novice stock picker.

Homes:  My wife and I just noticed that the homes in our neighborhood have actually fallen back to the level where we originally purchased ours back in January of 2002.  Obviously if you’re trying to sale this is incredibly disappointing news, but for you buyers out there, there has never been a better time to buy a new home or add a 2^nd home for investment purposes.

Mortgage Rates:  Arising out of the incredible drop in home prices, which has precipitated the multiple recent cuts in the Prime rate by the FED, mortgage rates are again nearing history lows.  As of this post, 30-yr. fixed-rate mortgage can be had for as low as 5.42%, a noticeable rollback not seen since June of 2004.

Credit Cards:  Are you a good credit customer with a credit score in the upper 20% of the medium (670 to 720+)?  If so, now is the time to take advantage of that spotless credit history by calling up your credit card provider and requesting a lower-rate.  American Express and MasterCard in particular have announced record levels of customer delinquency recently.  Take advantage of their need to hold on to their best creditworthy customers by calling and requesting a rate cut today.

Travel:  During a recession, the first thing the average family cuts back on is travel.  This loss in demand immediately translates into increased inventory in the hotel, car rental and cruise niches.  Low demand for off-season inventory to hot spots like Florida, Hawaii, and Mexico means a better selection and better deals for the discerning traveler. This will not be the case however with airline travel where existing thin profit margins coupled with $100+ a gallon jet fuel rates will keep airline travel mostly where it is now.

Recessions do not have to mean excessive belt-tightening and more Ramen Noodles for the average American family.  They can instead signal new investment opportunities, more time with loved ones in exotic locales and even a lower monthly credit interest rate.