Wikinvest Wire

Start the recession count-down

Thursday, March 27, 2008

Now that the third and final reading on fourth quarter economic growth is out of the way, analysts all around the world can look toward next month's "advance" estimate of first quarter growth as an early indication of the "official start" of the current recession.
Yes, it's pretty clear we're already in a recession - nearly everyone seems to think so.

Though the "official" determination of when a recession starts and stops is the domain of the Bureau of Economic Analysis and they won't make any pronouncement until well after the fact, a recession is generally defined as two or more quarters of negative real economic growth which, apparently, don't have to be consecutive (see the 2000-2001 recession above).

Earlier today, the Commerce Department reported that economic growth in the last quarter of 2007 was unchanged at 0.6 percent and growth slowed to 2.2 percent over the entire year, the slowest pace in five years.

The outlook is for zero real growth in the first quarter, which ends on Monday, and a contraction of one percent is now expected during the second quarter.

Those shrinking blue bars in the chart below will make all the difference in upcoming reports. The long-anticipated decline in personal spending may be at hand, though the demise of the American consumer has been oft-predicted, yet never realized before.

Will 2008 be the year?
Exports (in green) were about the only bright spot in 2007 as commercial building (part of private domestic investment in red) now seems to be succumbing to the same fate as residential building did in 2006.

Don't be surprised to see that violet bar expand over the next year.

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Anonymous said...

The recession start could still be dated to December 2007 despite the 4Q07 GDP being barely positive. :-)

pft said...

The president of the NBEA said 2 weeks ago he believed we were in a recession. While not official, he is after all, the president of the group that decides this.

They like to make it official when they can also say, but it looks like we are out of it now, or will be soon.

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