For everyone who was worried that the NBER will have to declare a recession even without a negative reading on G.D.P., you can rest a little easier now. Yesterday morning provided more evidence that if and when the NBER's cycle dating group gets around to it, a recession will probably be marked as starting right around the turn of the year.
The government reported that the economy grew 1.9 percent in the second quarter, but a revised reading of the fourth quarter of 2007 reveals that the economy contracted 0.2 percent:
Via Felix, it looks like that BusinessWeek's Michael Mandel is very pessimistic about the 1st half of this year:
In my view, this process of downward revision of the stats for 2007 and 2008 will continue over the next several years. It takes that long for all the source data to catch up (for example, tax return data for 2008 is not available until mid 2009 or even later). By the time that the data revisions are done, it will be clear that GDP growth in the first half of 2008 was negative, despite what the stats say now.
In other words, I believe that the statistics will eventually show that we are in a recession now, no matter what the official data says now.
It's hard to disagree with Mandel's second point, especially since the statistics are already pretty much showing that we're in a recession. It also helps when the NBER's former president said as much to the WSJ's Sudeep Reddy earlier this week:
Harvard professor Martin Feldstein, president of the NBER until this month, says the nation has been "sliding into a recession" since January, when many monthly statistics peaked. But a GDP decline isn't necessary "if there is enough other evidence that the economy is contracting," Mr. Feldstein says.
But Mandel's first point is largely at odds with recent history. There's little doubt that the advance GDP reading we got yesterday will be revised next month. Thursday's release included revisions that went back to 2005, and the average revision from the advance nominal figures to the latest nominal figures was 1.1 percentage points with a standard deviation of 0.9 percent. So that would seem that a revision from 1.9 percent -- the advance reading on Q2 GDP -- down to -0.1 percent is not out of the question.
But research by BEA economists looking at growth figures between 1983 and 2002 found that the advance and the latest GDP figures were in agreement in terms of economic growth 98 percent of the time.
This is all mostly mental masturbation -- econwatchers' version of box score-reading -- but who said box score-reading wasn't fun?
This article has 1 comment:
How can you take these numbers seriously with an inflation figure of 1.1%? In this economy?
Is there any credibility left for these numbers?
1.1% inflation this quarter? With a CPI of 7% and a PPI of 14%?
Puh-leeze.