HILARIOUS! Fed says no recession! Economy "grows" by only 0.6 percent in 1st quarter of 20

Started by MikeWB, April 30, 2008, 09:52:50 PM

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MikeWB

Such nonsense and creative accounting. I'll bet you anything that while the Bush is in the office, economy will not officially enter recession. They'll print so much money and hide the losses under the rug and  they'll never acknowledge recession. Only the next president will be able to uncover the mess and revise the books.
QuoteEconomy grows by only 0.6 percent in 1st quarter of 2008   

Apr 30 11:52 AM US/Eastern
By JEANNINE AVERSA
AP Economics Writer

WASHINGTON (AP) - The bruised economy limped through the first quarter, growing at just a 0.6 percent pace as housing and credit problems forced people and businesses alike to hunker down.
The country's economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday. The statistic did not meet what economists consider the classic definition of a recession, which is a retraction of the economy. This means that although the economy is stuck in a rut, it is still managing to grow, even if modestly.

Many analysts were predicting that the gross domestic product (GDP) would weaken a bit more
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MikeWB

Quotehttp://bigpicture.typepad.com/comments/2008/04/congratualtions.html
Congratulations! Its a Recession!
Wednesday, April 30, 2008 | 09:49 AM
in Data Analysis | Economy | Inflation
It doesn't take too much advanced mathematics to note that by several historical methods for determining whether the economy is contracting or expanding, we are now in a recession.

Consider a true inflation measure of GDP, per capita measure, or the NBER methodology. All three show economic contraction.

Let's start with our "Reality-based" analysis:

The only conclusion an honest read of inflation produces is that both Q4 2007 and Q1 2008 were positive in nominal terms, but negative in Real terms. Remember, the goal of GDP should be to figure out how much the economy is expanding or contracting -- not how much prices rose.

By any honest measure of inflation -- and not the 3.5% BEA price index for gross domestic purchases -- both of the past two quarters would have been negative. How can we have an understated inflation rate of 4%, and a GDP Price Deflator of just 2.6%?


2) The NBER methodology: The 2 consecutive quarters of GDP contraction is not the only metric for identifying recessions. According to the econo-geeks at the National Bureau of Economic Research, a recession is defined as a "significant decline in economic activity spread across the economy, lasting more than a few months."

Here's their specific language:

"Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. Our procedure differs from the two-quarter rule in a number of ways. First, we consider the depth as well as the duration of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in economic activity." Second, we use a broader array of indicators than just real GDP. One reason for this is that the GDP data are subject to considerable revision. Third, we use monthly indicators to arrive at a monthly chronology."

Hence, if we follow what the people who actually determine what is and isn't a recession say abnout the matter, and not just limit our analysis to  GDP, then its pretty clear we are now experiencing an economic contraction.

Rex Nutting reminds us that 1) After-tax inflation adjusted incomes have been stagnant since September; inflation-adjusted sales have fallen at a 5.2% annual pace in the past three months, and are essentially unchanged from six months ago; industrial output has stalled;

UPDATE: Rex adds that spending on services rose 3.4%, including a 14% rise in real spending (seasonally adjusted) on household heating. It
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sullivan

QuoteQ1 2008 were positive in nominal terms, but negative in Real terms. Remember, the goal of GDP should be to figure out how much the economy is expanding or contracting -- not how much prices rose.

By any honest measure of inflation -- and not the 3.5% BEA price index for gross domestic purchases -- both of the past two quarters would have been negative. How can we have an understated inflation rate of 4%, and a GDP Price Deflator of just 2.6%?

This analysis is erroneous in that it assume GDP stands for Gross Domestic Purchases, when in fact it is Gross Domestic Product. The goal of GDP is not to figure out how much the economy is expanding or contracting, it is the total value of all final goods and services produced within that economy during a specified period. The GDP deflator is a measure of the change in the prices of all domestically produced final goods and services in an economy.

The level of purchasing (whether of domestically produced goods/services or otherwise) is not an indication of a healthy economy - it is the ratio between the amount produced and amount consumed that is the key figure. Specifically, when a nation is in or at the brink of a recession, the ratio of an the amount imported against the amount exported (the balance of trade deficit) is a far more important figure.

In any event GDP is only one side of an equation and is a figure that is notoriously easy to fabricate.  For example, goods manufactured in Mexico or China (or anywhere outside the U.S.) and then subsequently imported in the United States for some trivial 'finishing' can have their full 'final' value considered "US Produce" for the purposes of GDP.
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