Monthly GDP data from Macroeconomic Advisers

The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), the semi-official arbiters of the begin and end dates of recessions uses a variation of GDP in their analysis. Rather than use quarterly GDP, they look at monthly real GDP. Alas, the U.S. government does not report GDP on a monthly basis, but the committee points out that some private groups such as Macroeconomic Advisers (MA) do. In fact, I just found the data on the MA Web site:

Macroeconomic Advisers Monthly GDP Index - 3/14/08 [Excel spreadsheet]

Alas, they are only (publicly) reporting the data through January.

The good news is that January real GDP was up strongly from December, and at an all time high. Not exactly what you expect in a recession.

Going back to 2007, what we see is that there was a "local" peak in real monthly GDP in September, then a sharp decline in October, but then two consecutive moderate gains in November and December that reclaimed most but not all of the October decline, and then January pushed real GDP back up to a new all-time high (also known as a new "peak".)

Clearly there was a "mini-recession" of sorts in October that precipitated the financial and stock market turmoil in November as well as renewed Fed rate cutting, but the evidence seems to be that the real economy recovered for at least the three months after that "October Dip."

It is very possible that we could see another dip in February/March, but we could also see another recovery as well. In fact, given all of the financial turmoil in February/March, it would be a surprise if there wasn't a dip of some sort. But, even a two-month dip would not constitute a recession or even a recession signal.

The real bottom line here is that the most recent publically available data points for two of NBER's top two recession criteria are not pointing at recession, yet. Payroll employment is starting to point in the direction of a recession, but is still too close to a flat line to constitute a "significant" decline. Industrial production has had one down month since its all-time high, but one month is never a trend. I do not have all of the real wholesale trade numbers yet, but do know that February was down moderately after being up strongly in January.

I do not know whether MA or their subscribers have a GDP number for February yet, but I am guessing that there will be a number available around April 14, either only to MA subscribers or us in the general public as well. It will be interesting to see if January was the peak or not. But even if it was a peak, it might still be only a "local" peak.

We do know that the head of NBER, Martin Feldstein, who is also a member of the dating committee, did recently say that he believes the economy has been sliding into a recession since December or January ("I think that December/January was the peak and that we have been sliding into recession ever since then"), but I do not know whether he was basing that personal opinion strictly on the publically available data or whether he actually has access to the MA real GDP number for February. He did also suggest that the Q1 GDP data would be "misleading" and not necessarily indicate a recession. That may mean that he either knows that February was not really bad or maybe merely that he expects that January will outweigh whatever happens in February and March.

In any case, what really matters is how April and May shape up. We do know that people will start getting checks from the government in May. And some people will be getting tax refunds in April as well. And, a fair amount of mortgage relief is in the pipeline as well.

Stay tuned.

Or even better, relax and go about your business and life and ignore all of this mindless chatter and anxiety over what might shape up to be either a false recession or a relatively mild recession.

Me, I actually love this macro economic stuff. If only I could make some money off of it. All of the volatility, both data and market, is great for traders, but I do not have the aptitude for trading.

-- Jack Krupansky