ECRI: Conditions Still Consistent With Recession

by: Cullen Roche

I've been taking the other side of the ECRI's recession call for over 18 months now, but its latest call cites an unusual occurrence:

So, with U.S. GDP growth at 2.5%, how can we be in recession?

Few realize that GDP data for almost all the early quarters of recent recessions have been revised down dramatically.

Recall that the GDP release on Aug. 28, 2008 -- with the economy eight months inside the Great Recession -- revised Q2/08 GDP growth to 3.3% from 1.9%, up from 0.9% in Q1/08. But both of those data points, as well as GDP data for the first two quarters of the 2001 and 1990-91 recessions, were revised by 2 to 4 percentage points over time. This is how real-time data often behave during recessions.

In any case, y-o-y nominal GDP growth at or below 3.7% has been seen only in recessionary contexts. In Q1 2013, it fell to 3.4%, the second straight quarter below 3.7%.

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I think we'd all agree that the economy isn't exactly robust right now, but I don't see the recession here.