Here are the latest reads on monthly GDP:
Figure 1: Real GDP in billions Ch.2005$, SAAR (blue bars), Macroeconomic Advisers 8/17 release (green), and e-forecasting 8/19 release (red). NBER defined recession dates shaded gray, assuming end occurs at 2009M06. Source: BEA 2009Q2 advance release, Macroeconomic Advisers, e-forecasting, NBER.
Macroeconomic Advisers writes:
… The level of monthly GDP in June was 0.2% below the second-quarter average at an annual rate. Average monthly increases of 0.4% per month would support our latest tracking forecast of a 2.8% increase in GDP in the third quarter.
e-forecasting writes:
Following a decline of 3.2 percent in June, the real-time monthly GDP, expressed at seasonally
adjusted annual rates in chained 2005 prices, increased 6.3 percent in July to $12,938.4 billion.
Wow, even you guys are finally seeing the green shoots. Although the stock market has already ran up 50%.
One pattern that I’ve found often repeated is the following:
During good times, the optimists are often wrong and fails to see the trouble that the pessimists see looming in the horizon.
During bad times, the pessimists are often wrong and fails to see the small green shots that the optimists see spouting out of the char landscape in the aftermath of a crisis.
The optimists and the pessimists almost never change their attitude and outlook in a timely manner.
Lesson: when time is good, listen to the pessimist. when time is bad, listen to the optimist.
Menzie,
Slightly off-topic, but linked to the earlier post on output gaps. Here is a link to an Atlanta FRB evaluation (by James Nason) of various statistical methods for evaluating output gaps:
http://www.frbatlanta.org/invoke.cfm?objectid=2E0C11CE-5056-9F12-12E96633BB24CCA6&method=display
In my view, it just shows once again that both the conceptual and measurement issues surrounding the output gap remain very large.
The Great Recession: December 2007 – June 2009
Now the painful recovery.
@silly things:
“Lesson: when time is good, listen to the pessimist. when time is bad, listen to the optimist.”
Bad advice. My advice: Don’t listen to anyone. Hear all arguments, think for yourself. Then again, why should you listen to me here?
“Wow, even you guys are finally seeing the green shoots. Although the stock market has already ran up 50%.”
My take on this: Stock markets are a bad indicator for the status of the economy, since perception in the markets and reality can diverge to a large degree, and this for a long time.
As for economic recovery. Massive stimulus spending by governments has to show up somewhere. Thus, no surprise here, when there is one or more quarters of GDP-growth. The more important question is, whether this is the start of a new self-sustaining cycle of capital accumulation. I have big doubts here, since I don’t see that any of the pre-conditions, the disproportions that led to the global recession have been really eliminated from the system. The world is still sitting on a mountain of debt. The total debt in the US-markets (private, companies, and government debt all together) to US GDP ratio was at about 375% as of Q1 2009, far higher than the debt bubble before and during the Great Depression, which deflated back then.
50 trillion US-dollars of debt and assuming 5% average interest rate means 2.5 trillion US-dollars a year alone to pay off interest, which has to be paid from generated income, if you don’t want to deplete the capital stock. To generate a nominal income of 2.5 trillion in an 14 trillion US-dollar economy, the nominal GDP would have to rise by almost 18% a year, just to maintain the nominal debt level. In reality, it would be even more, of course, since the debt isn’t equally distributed. The society is split in net creditors and net debtors. The 2.5 trillion interest payment would have to come from the income of the net debtors, which is smaller than the total income in society.
If this biggest debt bubble maybe in history bursts, and I don’t really see how a deflation of this debt could be prevented forever, despite all efforts by governments globally, then, I am afraid, the global recession we have seen so far is nothing compared to what could be coming.
rc
Anecdotal: A friend who owns a small plastic injection molding company says that orders are beginning to flow back in such that he thinks they may survive — note that the word is “survive”, not “prosper”.
There is usually some greenery on the talus slope at the bottom of a cliff.
I must agree with RC. With approximately 1/2 million jobs going away every month, along with a number of people whose unemployment benefits stand to run out over the coming months, I cannot see consumer confidence returning any time soon. Additionally, I feel that alleged “green shoots” in housing are merely seasonal market fluctuations. Families prefer to move while their children are on summer vacation from school. Expect foreclosures to continue increasing as jobless benefits run out and more homeowners give up on upside down mortgages.
@steve,
Unless you’ve listened to someone’s view point, you can’t determine if his view is optimistic or pessimistic. Therefore one should listen to everyone’s view is implied by my message. Furthermore, it is obvious to the point of being pedantic. However, you’ve probably missed my point which is both the optimists and pessimists are consistently wrong and are wrong under different environment.
Let’s consider your current pessimistic view.
Today we know UK, France, German, Norway, India, Japan, China, Indonesia, Australia and etc. have all now had a positive GDP reading. US GDP most likely has already turn positive too. Therefore more than 80% of global economy has already turn the corner. That is 80% of global economy!
With such overwhelming evident and yet you are still holding on to your view. Thank you for illustrating my point about pessimists are consistently in bad times.
I can compile a long list of imbalances that are being corrected since the start of the crisis. For example, what is the US savings rate? What is the current US account deficit? Do we have more debt or less debt than before the crisis? Alas, me making this list for pessimists like you is pointless. After all, that is the theme of my post.
Again, thanks for making my point.
@silly things
You may have me confused with someone else.
@rootless cosmopolitan
My previous post address to steve was meant for you.
@steve
Thanks for clearing up my mistake.
Silly things,
“However, you’ve probably missed my point which is both the optimists and pessimists are consistently wrong and are wrong under different environment.”
So you would have claimed in spring 1930 that the pessimists were wrong, although they were right.
“Let’s consider your current pessimistic view.
Today we know UK, France, German, Norway, India, Japan, China, Indonesia, Australia and etc. have all now had a positive GDP reading. US GDP most likely has already turn positive too. Therefore more than 80% of global economy has already turn the corner. That is 80% of global economy!
With such overwhelming evident and yet you are still holding on to your view. Thank you for illustrating my point about pessimists are consistently in bad times.”
Let’s refresh what my argument was. I said one or more quarters of GDP growth aren’t a surprise, since massive stimulus spending by governments worldwide has to show up somewhere. Then I pointed out that the biggest debt bubble maybe in history still exists, I made a coarse estimate why this bubble can’t be sustained, and I said that things could become very ugly, when it deflates.
Which one of my “pessimistic views” exactly do you believe have you invalidated now by pointing to GDP growth for Q2 2009 in various countries?
rc
The comment by “Anonymous” at 01:32 PM was by made by rootless cosmopolitan.
rc
I’m not an economist, but if I recall well the NBER does not just look at DP alone as a reference to determine is a cycle lbeled “recession” has ended, just look at 2001 GDP was even positive in one f the quarters if my memory still works; also I watch TV sometimes (mainly to watch soccer games) and yesterday by chance I caught an interview in that cute tv channel cnbc to one of the governors of the ECB a german guy in jackson whole or whatever and he plainly said, in language people with much less technical domain that many of the readers here have can understand, that there is just too much euphoria in the markets and that it is too early to say that “we turned the corner”, hey that from a central banker of a country in the list of victorious economies “emerging” from the recession; what a joke, let me tell you what, I’ll give you the metrics that real people, the middle and working non-goldman sachs class care about, that will mark the end of the current “re-pression”: when real incomes without transfers, the # of weekly workweek hours and the $$ final sales of domestic goods and services all grow YOY by more than 3% 3 months in a row, when part-time employment for economic reasons decline significantly and total unemployment falls under 7%, as well as when total household debt is no more than 40% of disposable income. Let me know when we get there.
“However, you’ve probably missed my point which is both the optimists and pessimists are consistently wrong and are wrong under different environment.”
200% correct. That is why crisis get deeper as pessimists get convinced they are finally right and booms get bust as optimists make the same mistake.
Argumentation is secondary to these psychological traits, it is adjusted accordingly.