Feb 02

gdp2012q4

4th quarter GDP shrunk by .1%. Are we heading toward another recession? Have we expanded our way out of the last one? A double dip recession can occur when the economy starts to shrink after only a quarter or two of growth. With two years of growth, even slow growth, behind us, a recession would be a new recession, not a double dip.

That said, defense outlays dropped by a 22% rate in Q4, and given how large this spending usually is, it accounted for all of the dip we just saw. Jobs showed an increase of 192,000 according to my friends at ADP, the payroll processor. And the market (measured by the S&P 500) shrugged off the news gaining nearly a percent for the week.

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Nov 02

Subject to revision, the Q3 GDP was up 2.0% as compared to the Q2 growth of 1.7%. The first revision will be published November 23, and a final number in December. While 2% is nothing to write home about, and certainly not the 5% number we saw in Q4 of last year, it’s still positive, and I’ll take slow growth in these uncertain times over a double dip any day.

Joe

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Dec 05

I just posted on Wednesday that we have been in recession a year already, and also noted that we’ve not seen two quarters of negative growth. The determination of whether we are in recession is a bit more complex than this simple two quarter rule, and this Q&A by the National Bureau of Economic Research (the agency responsible for dating the peaks and troughs of the business cycle) offers a glimpse into their rationale:

Q: The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP. How does that relate to the NBER?s recession dating procedure?

A: Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them.? As an example, the last recession, in 2001, did not include two consecutive quarters of decline. As of the date of the committee?s meeting, the economy had not yet experienced two consecutive quarters of decline.

Their report titled Determination of the December 2007 Peak in Economic Activity makes for some interesting reading.
Joe

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Dec 03

It would appear that the definition of recession is far more complex and more than “two quarters of negative GDP growth.” We found out last night that we are already 11 months into the current recession. This beautiful graphic (well hidden within the New York times website, so while I saw it easily on my iPod Touch last night it took quite some time to find it on the web today) illustrates some of the factors NBER (National Bureau of Economic Research) takes into account. Click on it to view full size. More on this story Friday.

Joe

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Nov 03

The Q3 GDP number came out last week and the GDP was negative by .3%.

.3% wouldn’t seem so bad in normal times, but these times are far from normal. The economy is on very shaky ground and these are uncertain times. Now, Joe, you might tell me, no time is certain, and with that I agree. But the current market volatility is at a record high, and the market itself appears to be coming undone, seemingly due to the derivatives that were to supposed to provide further liquidity and reduce risk.
Now, advisers are suggesting that everyone stop spending, and start to save. But this is actually dangerous advice, how will this quarter’s GDP be impacted should we all just decide to tighten our belts and stop spending. Now is the time to go out and buy. We need to spend our way our of the impending recession we all are dreading.
Joe

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