The Big Picture

« Fifth Third Bank | Main | Stairway to Heaven is Worth $572 million »

2008 Recession Call: Increasingly Difficult to Avoid

Wednesday, June 18, 2008 | 05:30 PM

The scales continue to tip in favor of our Recession call (Yo! Jimmy P!). Three recent comments suggest as much:

1) Macroeconomic Advisers have been reluctant to make the recession call. They now estimate that economic output declined at a 0.5% annual rate in April (gross domestic product). The April decline followed an annualized gain of 4.5% in March, a decline of 10.1% in February and a 7.5% gain in January.
Macroeconomic Advisers uses a model based on the BLS formula for quarterly GDP. (Source: Real Time Economics)

2) Building on the MacroEconomic Advisers monthly database is Merrill Lynch's David Rosenberg. In note late Tuesday, David writes "The recession in GDP is here – but it’s in the monthly data, not the quarterly data. The MacroEconomic Advisers monthly database shows that real GDP dipped at a 0.5% annual rate in April and has contracted now in two of the past three months.

Note that since January, the month we had been saying for some time that represented the peak of the business cycle, real GDP has declined at a 2.2% annual rate. So, do not be fooled by that 0.9% first quarter GDP print – it is masking an erosion in activity beneath the veneer of quarterly averages. (Source: David A. Rosenberg, Merrill Lynch)

3) Martin Feldstein says the U.S. is "Slipping into recession." Normally, we do not weight any single person's viewpoint all that heavily. But Feldstein is the chief of National Bureau of Economic Research, the group that actually dates recession in the U.S.

And, since he is retiring this year, this is as much as any NBER Chair ever tips his hand on the NBER recession call. (Source: Bloomberg)

~~~