Real & Private Fixed Investment
A nice pair of charts from the St. Louis Fed explains part of our fears for a contraction in the coming quarters. Note the shaded gray areas are prior recessions.
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Private Fixed Investment
Real Nonresidential Investment
The bright spots? The above chart has not yet slipped into the Red zone.
Also positive (albeit somewhat anecdotal) approach is this academic analysis below:
Academic studies* have shown that a spike in the number of stories appearing each month in the printed editions of the New York Times and Wall Street Journal that mention "recession" runs somewhat ahead of the actual economic contraction.
The rationale for this indicator is that periods of below-trend growth of sales, production, employment, and profits spur an increased awareness of the possibility of a recession developing. This awareness shows up as recession chatter in the financial press.
There are a few things to notice in the chart: First, “recession” stories seem to exhibit normal business cycle characteristics; the number of stories rises during periods of slow growth and recession and remains low during periods of economic expansion. Second, recession stories seem to peak toward the end of the recession, or shortly after, and then fall sharply—which suggests that this indicator might be useful in helping identify troughs,
though perhaps less so for peaks . . . Finally, despite a noticeable jump in the number of
“recession stories” in the Wall Street Journal in March 2007, both series remain at levels consistent with economic expansion.
Fascinating stuff . . .
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Sources:
Recession Rumblings
Kevin L. Kliesen
Federal Reserve Bank of St. Louis
May 2007
http://research.stlouisfed.org/publications/net/20070501/netpub.pdf
* Academic studies:
“Is a Recession Imminent?”
John Fernald and Bharat Trehan,
Federal Reserve Bank of San Francisco Economic Letter,
Number 2006-32, 11/24/06.
“Identifying Business Cycle Turning Points in Real Time”
Marcelle Chauvet and Jeremy M. Piger,
Federal Reserve Bank of St. Louis Review,
March/April 2003, 85(2), pp. 47-61.
Tuesday, May 29, 2007 | 07:09 AM | Permalink
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Comments
"read me goldilocks, again, dad. but this time get more growling in the bears part"
Posted by: jmf | May 29, 2007 8:38:16 AM
Great post, interesting 'under the radar' stuff.
Posted by: Tom C., Stamford,Ct. | May 29, 2007 8:53:43 AM
The consensus for Q1 GDP is to be revised down to 0.7%. A trader on Bloomberg just said that the consensus is for the GDP to be revised up secondary to the strong housing numbers.
I am puzzled about the trader’s statement.
Does anybody have any idea as to what the guy was talking about? I am puzzled about his statement.
Posted by: V L | May 29, 2007 9:36:47 AM
http://www.safehaven.com/article-7608.htm
An other good study of Mr Kasriel on the same subject at the above address.
Posted by: Philippe | May 29, 2007 9:41:53 AM
Barry,
Larry Kudlow told me that we would never ever ever have another recession because the economy is the greatest story never told. Jeeze, get with the program.
Posted by: Christopher Laudani | May 29, 2007 9:48:43 AM
"A trader on Bloomberg just said that the consensus is for the GDP to be revised up secondary to the strong housing numbers.
I am puzzled about the trader’s statement."
Gee, me too, V L. Hard to imagine how April housing numbers can improve a quarter that ended in March. A puzzler, for sure. GDP ex-calenders?
Was he smoking crack? Or maybe he had just taken the "red pill"?
Posted by: Winston Munn | May 29, 2007 11:45:00 PM
I wonder how ubiquitous those recession stories are? If they are everywhere they actually could be influencing the public's spending behavior which might actually exacerbate the recession.
Is it possible that the media's meddling has a part to play?
Posted by: DavidB | May 30, 2007 12:52:18 AM
Looks like these were some signs of upcoming trouble. These past 3 weeks have made the late summer/fall volatility look like small bumps in the road.
- Richard
http://richard-wilson.blogspot.com
Posted by: Hedge Fund | Jan 24, 2008 11:51:33 PM
Very interesting stuff. Thanks for posting the charts as well, it always helps to see a visual.
Posted by: Hamed Elbarki | Apr 16, 2008 6:49:49 PM
