Monday, October 03, 2011

Recession Watch: No Evidence Yet of Double-Dip

According to the National Bureau of Economic Research (NBER), a recession is a "significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."  Here's how some of those key recession-indicating variables are doing:

1. Industrial production: Increased by 4.67% at an annual rate over the most recent three month period from May to August.

2. Private payroll employment: Increased by 1.27% at an annual rate during the most recent three month period from May to August.

3. Real GDP: Increased by 1.33% in the second quarter.  

4. Real Retail sales: Decreased by 0.56% in the May-August quarter, at an annualized rate.

Other indicators:

5. Automakers are reporting strong sales gains in September vs. last year: Chrysler +27%, Ford +9% and GM +20%.  

6. The September ISM manufacturing index beat consensus expectations today and increased to a three-month high of 51.6%, which when annualized is historically consistent with 3.2% real GDP growth in the third quarter. 

7. Weekly rail freight shipments are showing ongoing signs of increases in economic activity, not declines.   

8. Jeremy Piger's "recession probability" (based on four monthly variables: non-farm payroll employment, industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales) was updated last week for July at 0.9% (less than 1 out of 100 chance), unchanged from June, and down from 1.2% in May and 1.1% in April.

MP: All of the variables reported above are positive except for real retail sales.  Taken together as a group, these positive indicators suggest that while the current expansion might be sub-par, the economy is certainly not experiencing any of the significant, persistent and widespread declines that would lead the NBER to declare sometime next year that the U.S. economy entered a recession in any of the recent months. 

9 Comments:

At 10/03/2011 2:49 PM, Blogger Hans said...

The latest EIA July report on gasoline consumption, show a massive decline of -4%...

This must give all pause!

 
At 10/03/2011 3:05 PM, Blogger morganovich said...

restaurants are also negative, as in personal income.

small business confidence is at stunning lows.

if we deflated GDP and calculated CPI as we did prior to 1992, there would be no double dip argument at all as we would have never emerged from recession.

we can play definitional games with it, but that does not make it feel better out there any more than setting you scale back 20 pounds will get you into your pants.

 
At 10/03/2011 3:10 PM, Blogger Rufus II said...

The 3rd qtr felt kind of 1.0 to 1.5% ish, to me.

I've been predicting a negative read in the 4th qtr for about a year. I'm thinking, now, that we might just level off, and do a "touch and go" from here.

If these gasoline prices keep plunging, it will start to have an effect (at some point.) :)

 
At 10/03/2011 3:11 PM, Blogger morganovich said...

also, those annualized number overstate the case a bit by allowing seasonality to be mistaken for growth.

US industrial production was up 3.4% year on year and only .2% in august (most recent reading) which annualizes to 2.4% growth.

also note: the index is 94 vs 100 in 2007.

that's still 6% off the highs, hardly a robust recovery.

 
At 10/03/2011 4:03 PM, Blogger juandos said...

Well O.K. but how often does the following have to happen before recession/depression or something else is the tune of the day?

Courtesy of Zer0hedge: Market Snapshot: Financials Flop, Credit Collapses, Market Closes At 2011 Lows

 
At 10/03/2011 4:08 PM, Blogger Eric H said...

"if we deflated GDP and calculated CPI as we did prior to 1992, there would be no double dip argument at all as we would have never emerged from recession."

But..but...but all those shaded region charts from INGSOC clearly show that the recession ended in 2009...2+2=5.

 
At 10/03/2011 5:42 PM, Blogger PeakTrader said...

Morganovich says "if we deflated GDP and calculated CPI as we did prior to 1992, there would be no double dip argument at all as we would have never emerged from recession."

Fortunately, improvements in calculating the CPI has made it more accurate.

However, it still overstates inflation, although by less than before 1992.

 
At 10/03/2011 7:19 PM, Blogger Buddy R Pacifico said...

If the U.S. goes into recession, then is it a return to normal U.S. economic cycles?

From ECRI (Economic Cycle Research Institute):

" So it comes as no surprise to us that, with the latest expansion only a couple of years old, we’re already facing a new recession. Actually, such short expansions are hardly unheard of. From 1799 to 1929, nearly 90% of U.S. expansions lasted three years or less, as did two of the three expansions between 1970 and 1981."

ECRI is calling for a Recession in 2012.

Maybe this time it will different. Haunting words but maybe the slow growth, instead of a snapback, will result in persitent growth.

Lowering corp taxes, on-shoring, domestic energy production and manufacturing might stretch out the current growth cycle.

 
At 10/04/2011 8:27 AM, Blogger NJK said...

If ECRI is right and we start a recession with unemployment at a base of 9+%, then we are really talking about a depression.

 

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