What the hell are we supposed to believe? It is alleged that America is in recession and there is doubt in the market and in fact in world economics and there is an obvious downturn in share prices. Now on the ABC news it appears America is far from a recession and things aren’t as bad as they seem. Any comments?
Don’t believe anyone. I haven’t seen the story you refer to but I assume the media hacks saw the second quarter US GDP number and assume that things in the US are all fine and dandy again. GDP is a rubbery number to put it mildly. However the NBER, which makes the offical decision on whether the economy is in recession doesn’t use GDP to make their determination.
The 4 components the NBER uses are:
1) Employment – has been down 7 months in a row.
2) Industrial production – peaked in January
3) Real personal income excluding government transfers. down for the last 4 months in a row.
4) Real sales activity – this is the only one of the 4 that gets counted in GDP.
My opinion is that the US economy went into recession sometime in the first quarter of 2008 (probably Feb) and has poked it’s head out briefly in the second quarter thanks to the rebate checks. But don’t listen to me either.
Typically the NBER makes the a call on a recession 9 months after it began on average. However it has taken as long as a year to decide in some cases so it could take until next year to hear about it. Could be tricky to call it before an election as well.
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