Monday, September 21, 2009

Monthly GDP for July ROSE by +0.3% (+4.3% annualized), Q3 tracking for a +3.3% annualized gain

Monthly real GDP, one of the five primary economic indicators that the NBER Business Cycle Dating Committee (NBER BCDC) uses to judge recession start and end dates, rose moderately in July by +0.3% or +4.3% annualized, after a -0.1% decline in June, and real Q3 GDP is forecast to rise by +3.3% annualized, according to Macroeconomic Advisers (MA). The government does not publish GDP data at a monthly level, but the NBER Business Cycle Dating Committee says that they refer to sources such as Macroeconomic Advisers (MA) and their MGDP data series. As Macroeconomic Advisers summarized GDP for July:

Monthly GDP rose 0.3% in July and was in line with the nearly flat trend exhibited since January.  The July increase was roughly accounted for by nonfarm inventories, whose drawdown in July was much smaller than in June.  Within final sales, an increase in domestic demand was just offset by a decline in net exports.  The level of monthly GDP in July was 0.9% above the second-quarter average at an annual rate.  We expect monthly GDP to continue to trend higher, marking June as the last recession month.  Average monthly increases of 0.6% per month in August and September would support our latest tracking forecast of a 3.3% annualized increase of GDP in the third quarter.

This report effectively "calls" the end of the recession as June: "We expect monthly GDP to continue to trend higher, marking June as the last recession month."

This one report does not necessarily herald the return of happy days for everyone, but at least it is not indicating a worsening of the trend.

Annualized real GDP in July was at roughly the same level as in February 2006, which is 4.42% below the peak GDP in June 2008 and 3.77% below GDP at the start of the recession in December 2007.

If the NBER BCDC is the definitive expert on marking of recessions, MA is the definitive expert on calculating real GDP at the monthly level with their MGDP data series.

-- Jack Krupansky

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