Forecast: Recovery, But Not Until Q3

The U.S. economy is headed for two quarters of negative growth in the first half of 2009, according to 43 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters project that real GDP will contract at an annual rate of 5.2% in the first quarter and 1.8% in the second quarter of 2009. The survey participants expect economic recovery to begin in the third quarter of 2009. On a year-over-year basis, growth is expected to be -2.0% in 2009 and 2.2% in 2010. See chart above.

Comments

[Aristophanes:]

Add at least another 12 months and they *might* be correct.

This is not one of those situations where surplus labour and capital reallocation can revamp production. The engine of consumption is broken, and the overseas markets are also contracting.

Who will buy the new goods from a turnaround in production?

Feb 17 04:12 PM

[Alex Filonov:]

Are you sure it's Q3 2009? Maybe 2010 or 2011?

Feb 17 04:20 PM

[User 347440:]

Exactly. Which year?

Feb 17 04:30 PM

[virilio:]

i imagined the recession would end when investment bankers were stripped of assets and entered prison cells (like Enron, but stricter) ... & then the public would feel confident enough to put money back in the stock market.

Apparently we are still at the house arrest in a $12 million solid gold apartment fed-ex'ing jewelry to relatives and Madoff's wife can keep the money stage. Hardly confidence inspiring.

Feb 17 04:51 PM

[Dave Wrixon:]

I think he is talking about the century.


On Feb 17 04:30 PM User 347440 wrote:

> Exactly. Which year?

Feb 17 05:14 PM

[Dave Wrixon:]

Having said that GDP is such a twisted measure he is probably right.

If the Fed prints dollar bills and buys Treasuries, does that get counted once or twice?

Feb 17 05:16 PM

[PassingBy55:]

I agree, all of this government investment in the private sector is "GDP" though most of us will feel the recession long after the government's convoluted metrics signal a return to prosperity.

"Mission Accomplished" anyone?


On Feb 17 05:16 PM Dave Wrixon wrote:

> Having said that GDP is such a twisted measure he is probably right.
>
>
> If the Fed prints dollar bills and buys Treasuries, does that get
> counted once or twice?

Feb 17 05:29 PM

[RandyRuiz:]

Zanax anyone, this group could use some therapy.

Feb 17 05:43 PM

[sheople:]

Oh yeah, and by Q3 50% of our GDP will be manufacturing, too. Please pass me another toke.

Feb 17 05:52 PM

[Schweizer:]

I recall a year ago that only a recession of 1-2 quarters were predicted by this same group.

NEXT!

Feb 17 06:33 PM

[You're Kidding:]

The world as we know it is ending.

All the various forms of leverage are unwinding and it won't be until all asset classes stop falling in value that confidence will begin to be restored. And the real recovery cannot begin until this happens. This is going to take longer than most people believe could possibly be the case. After all, don't we live in the best country in the world, and have the best of everything here? Our political system is the best, of course, and certainly our form of capitalism is the greatest, too, right?

These beliefs will die very slowly because we have all been thoroughly brain washed as children to believe in them, and most of us will have great difficulty in accepting the truth, which is that our political system is totally and utterly corrupt, and our financial/banking system is essentially a ponzi scheme.

The worst possible human emotions of greed, and detached selfishness rule the day, and we are destined to repeat cycles of recessions and even depressions, ad nauseum, until we wake up and demand more transparent and equal governance. This won't be happening anytime soon, probably not in the lifetime of anyone reading this. For some reason, few can stand the truth, and no politician can be elected unless they lie to us.

Feb 17 09:51 PM

[mr freddo:]

We are headed for a huge fear dump based on some seriously bad financial data coming from all over the world. A sense of panic grips me as I realize that the system is breaking down quickly. Dow 5000 is...next week maybe?

Bad Trade Data, Banks without capital, holding trillions in losses. Derivative contracts in the hundreds of trillions wreaking havoc as they lose trillions in value. And there is no way to unwind the position...

Financial Institutions are broken down, without capital, draining more losses every day. Very soon, a crisis will create a run on the banks. The banks will close.

It is time to prepare for the worst. Stock up on food, water, wine, vodka, medical supplies. Figure that you may want to stay inside and out of harm's way for a month or so.

I pray that I am incorrect about the course of events and that my fear stems from that which is seen at the bottom of bear markets. Panic, fear, capitulation.

Still, it doesn't hurt to be prepared.

Feb 17 10:20 PM

[Dirk McCoy:]

Yep, the monetary stimulus and confident leadership that could have helped this recovery happen sooner has stalled, and we're in for a longer slog now.

Obama's intervention will make a blip, and after thirty years of moderate growth with just three years of downtime and his efforts to start talking the economy up instead of down, the populace will have some hope for a rebound and we'll be hearing stories of recovery late this summer. But I don't see the leadership for the significant structural changes needed in the US and global economy to allow any kind of significant growth in the US economy long term. Rather, it looks like a shift back to the government led welfare state that will usher in an era of stagflation and malaise.

It's not too late for renewed commitment to the rule of law, it's not to late to reaffirm the sanctity of the debtor/creditor relationship, it's not too late to let people know that the government cannot provide for them as well as private enterprise could, it's not too late to tell our trading partners we plan on competing for their business, and it's not too late for the inflationary stimulus in our money supply to set the stage for a longer term recovery.

But the longer we fiddle around with minor stopgap measures, the more likely this becomes a serious depression and US living standards fall significantly.

Feb 17 10:38 PM

[the ilster:]

I am very close to your assessment. I just hope we dont have social collapse. I did buy a gun few weeks ago my gut told me to do it. by the way I never shot a gun in my life Im almost 40

I am short IYR and long SDS and long USO<(getting killed)


On Feb 17 10:20 PM mr freddo wrote:

> We are headed for a huge fear dump based on some seriously bad financial
> data coming from all over the world. A sense of panic grips me
> as I realize that the system is breaking down quickly. Dow 5000
> is...next week maybe?
>
> Bad Trade Data, Banks without capital, holding trillions in losses.
> Derivative contracts in the hundreds of trillions wreaking havoc
> as they lose trillions in value. And there is no way to unwind the
> position...
>
> Financial Institutions are broken down, without capital, draining
> more losses every day. Very soon, a crisis will create a run on
> the banks. The banks will close.
>
> It is time to prepare for the worst. Stock up on food, water, wine,
> vodka, medical supplies. Figure that you may want to stay inside
> and out of harm's way for a month or so.
>
> I pray that I am incorrect about the course of events and that my
> fear stems from that which is seen at the bottom of bear markets.
> Panic, fear, capitulation.
>
> Still, it doesn't hurt to be prepared.
>

Feb 17 10:56 PM

[Jolly_Rancher:]

The tax cuts will provide a massive macro-level refi for tax payers, swapping high interest credit card debt for 2% government debt. The difference will propel income higher and confidence higher. Along side of that will hit the rest of stimulus spending. These things together will give the banks a better bulls-eye to put some of that "TARP" money to work. Then comes the added income from low mortgage rate refis; and low fuel prices; low import prices; inventory clearinghouse prices. It'll feel just like a computer booting up. The question is, will the economy boot up into Windows fraught with spyware, slow and sluggish or will it boot into Linux, lean and mean, ready to serve. I'm afraid the former, but hey, it'll be fun for a while.

Feb 17 10:59 PM

[Moon Kil Woong:]

This bill was more a study in what government department gets the biggest bonus allocation than it was a stimulus plan. At least Paulson was honest when he called the bank bill a bailout bill. This is not a stimulus bill as much as a government spending increase.

The bad thing about that is it doesn't go to productive job creation and becomes structural spending or tax cuts that are very hard to reverse in the future.

It is true increases in GDP will add cash and income to the market when the private sector is dropping. The real issue is should this be done before the market finishes contracting and when it is, does this spending lead to long term and/or permanent improvements or sustainable economics or jobs growth later on?

We may find ourselves holding nothing but rubber bands to fix worse problems in the future as this recession matures.

Feb 17 11:06 PM

[Maxe Paul:]

Just looking at the pessimism here in these posts backs up your case. I believe a double low is at hand, one this month and the final low in March.

Feb 17 11:17 PM

[Gob:]

Yup. Once President Affirmative Action nationalizes our banks, auto industry, and health care system we should be right back on track!

Feb 18 01:39 AM

[Steve Soden:]

This financial crises started with some bad loans and then exposed a bunch of institutions overleveraged to a group of assets that are depreciating.

Feb 18 01:40 AM

[Lok Sang Ho:]

The forecast is about right. The world does not end here, and you will be surprised how resilient human society is.

Feb 18 08:54 AM