On the previous blog over on blogspot, I made numerous comments about an upcoming recession.
Guess what – it’s here. Just not officially, not yet. I’m betting that once the Official word gets figured, it’ll set the date sometime between July and September of 2006.
First, a re-examination of what constitutes a recession.
The official word comes from the NBER. Though they’ve several elements to the calculation, the basic one is two consecutive quarters of negative growth in the GDP. And I’m saying it’s here because we’ve already experienced the first quarter.
What? It was 1.6% growth? Wellllll, no.
One large error has already been identified – almost every economic blog going pointed this out. Specifically, all the auto manufacturers experienced a decline in production, but according to the GDP details light trucks and autos INCREASED sales — by a whopping 26%. Cut that to zero and that 1.6 becomes 0.9. And that’s only the start.
Additional factors include a housing adjustment factor that overstates it as well (claims housing numbers are growing vs the National Association of Realtor’s numbers that show flat to slight declines) and a historic tendency (as in almost all for the past few years) for the first release of GDP numbers to be revised downward for the next release. And again for the next, and sometimes for the final. The end number has frequently (more than 8 of the last ten) ended up over a full point – closer to a point and a half – below the first release number. This in combination with the aforementioned truck sales number means, well…
It means that we probably experienced negative GDP growth in the third quarter of 2006. And there is nothing on the horizon to indicate the fourth quarter will do better.