Recession? Not This Year

by: Dr. Bill Conerly

Wall Street's rule of thumb, that recession is two consecutive quarters of declining GDP, is not technically correct.  But it's not a bad rule of thumb.  Certainly there's no recession when the economy is growing substantially, even if the growth is below trend.  That's where we are today.
GDP
The latest quarter, 1.9 percent, is decent against a long run average of about three percent.  The details were fairly predictable:

  • residential construction terrible
  • consumer durables bad
  • federal government up
  • exports up

A couple of items were not so predictable:

  • business spending on equipment down.  The latest monthly numbers are positive, so look for a reversal next quarter
  • inventories down a lot.  Most likely this large a correction won't continue.

Next quarter?  We have a good shot at another decent but not strong quarter.  I'll update my forecast next week.

Business planning implications:  don't get caught up in the doom and gloom headlines.  Look into the detail of how your customers are faring.  Plenty of sub-sectors are bucking the trend.