There’s been a lot of discussion of whether the Administration’s forecast is too rosy. [1], [2], [3], [4], [5], [6] I thought it useful to examine this issue a bit more deeply.
Yearly Archives: 2009
Stock prices and fundamentals
How low can stock prices go, and how worried should you be?
Q4 Preliminary Release and Re-thinking That “Massive” Stimulus
The BEA released its preliminary numbers for 2008Q4 GDP. There was little good news in it, as many have observed. [0], [1], [2], [3] Consumption fell even further than first estimated. In an accounting sense, support from exports collapsed. Even the downward revision in inventories, which might have suggested a production rebound in this quarter, seems to incorporate more of a signal of further anticipated declines in demand, at least given the high inventory to sales ratios. And while declining imports add, in a mechanical sense, to output, it certainly hints at a sustained decrease in anticipated economic activity. Figure 1 shows these GDP components.
Point of Clarification: The Economic Report of the President, 2009
Misinformation in the talk-show world. From today’s Rush Limbaugh show (which is titled “A Teachable Moment on Tax Hikes”):
CALLER: Thank you for taking my call. I just wanted to point out something to you about your comments on taxing, and Obama’s own economic advisors agree with you, and it’s in a report that I found online. It’s the Economic Report of the President. It’s issued by the Council of Economic Advisors, which were appointed by Obama, and there’s an entire section in that report that says lowering tax rates stimulates economic growth.
RUSH: That was then. They have removed that from the website. What’s the woman’s name that wrote that? I’m having a mental block. Romer. Christina Romer. She wrote that. She put it on their website and once Obama won: Bam! It came off, and now in its place is: “Spending a dollar generates a dollar and a half.” It used to be, “Reducing taxes every dollar generates a dollar and a half,” or a half a dollar. They’ve totally reworked it. She’s been neutered, as it were.
Not Nonsense (House Prices)
Remember this graph?
The Bernanke rally
Tuesday’s stock market rally was pretty impressive. But can the mere words of the Federal Reserve Chair actually produce a 4% increase in the value of the U.S. capital stock?
The Output Gap: Neoclassical Synthesis, New Classical and New Keynesian
It has been interesting to me how much excited commentary has been elicited by my posts on output gaps. [0],
[1], [2], [3] I had thought the subject fairly uncontroversial, especially my reliance upon the CBO measure, which is calculated in a conventional manner, and is an object well-understood in mainstream macroeconomics (take your pick — from Hall and Papell to Mankiw). However, it’s clear that there is no such agreement in the blogosphere (which can be taken as an indicator of how dispersed beliefs are in that world). In any case, the reaction tells me that one’s belief in what determines potential GDP defines in large part how one thinks about the workings of the economy, and so I thought it useful to discuss alternative measures coming out of current academic work.
Deflation risk down but not out
While this week brought some pretty frightening numbers on industrial production and manufacturing surveys, I viewed Friday’s CPI release from the Bureau of Labor Statistics as slightly encouraging.
First Reading on (part of) Q1 GDP
Here’s a compilation of e-forecasting’s January GDP estimate, Macroeconomic Adviser’s December GDP estimate and forecast for 2009Q1. E-forecasting’s estimate is that January real GDP was declining at an 11.8% at annual rates.
Industrial Production and Manufacturing Output, Compared
One can get an idea of how bad this recession is compared to previous ones at the St. Louis Fed’s Recession Watch. They haven’t They’ve now updated the pictures to account for today’s industrial production release (-1.8% vs. Bloomberg consensus -1.5%)., so I will convey the situation in two graphs. To sum up, industrial production is lower than at the corresponding point in any previous post-War recession. For manufacturing output, the same is true back to the 1973 recession (as far back as this series goes).