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September 27, 2012

"You'll Need To Watch The Rear-View Mirror To Watch The Recession Come Into Focus"

@benk84 mentioned the downward revision to 2nd Quarter GDP, from 1.7% to 1.3% (a huge chop), and durable good orders dropped 13.2% (even huger).

New orders for long-lasting U.S. manufactured goods in August fell by the most in 3-1/2 years, pointing to a sharp slowdown in factory activity even as a gauge of planned business spending rebounded.

The index they're talking about went up 1.1% after two months of "hefty declines." I would not call that a "rebound."

The Commerce Department said on Thursday durable goods orders dived 13.2 percent, the largest drop since January 2009, when the economy was in the throes of a recession. Orders for July were revised down to show a 3.3 percent increase instead of the previously reported 4.1 percent gain.

The ECRI (a business cycle research institute) notes that most recessions are detected well after they've begun. And they say we're in one now.

But what data supports our recession call? We just discussed what GDP had looked like four years ago. Please note that for each of those two quarters GDP growth has since been revised down by two to three percentage points. Those are huge revisions.

Likewise, GDP growth prints for each of the first two quarters of the two prior recessions were revised by about two to four percentage points. The takeaway is that, in the early stages of recession, the data are almost always revised down, and the revisions tend to be quite substantial near business cycle turning points.

Knowing this, how should we feel about the current GDP estimates that average less than a 2% pace for the first half of 2012, i.e., weaker than first-half GDP growth looked four years ago? Please remember, by that time, in September 2008, the economy had already spent nine months in recession.

In the current cycle retail sales have already peaked back in March 2012 and, according to the household survey, employment has declined for the last two months, and for four of the last six months.

Santelli calls the numbers depressingly weak.

So... yay, Obama?


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posted by Ace at 12:07 PM

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