Did GDP Fall Within the 1st Quarter or Not?

Over the past month, I , citing Feldstein, have said that if one looks at available information on monthly GDP, available from estimates of MacroAdvisers, that output declined within the first quarter of the year, even though as standardly reported GDP was higher in QI overall than it had been in the last quarter of 2007. But, as it turns out, there is some ambiguity to the question.

The estimates do show GDP falling in February, by a hefty 10.1% anualized. But the numbers for January and March are up. To net out the three months, one must split hairs. The positive numbers for January plus March are just slightly greater in absolute value than February’s negative 0.9 (monthly). So the net is up? Not necessarily.

We are trying to figure out the change within the quarter, from beginning to end. Technically, that means from January 1 to March 30. But of course even Macroadvisors doesn’t report daily or weekly estimates. Estimated total real GDP in the month of March was just slightly above total real GDP in the month of December. So again the net is up? The most precise measure of the change between January 1 to March 30 is the change between the December-January average and the March-April average. That is a tiny negative number: GDP fell by an estimated $28 billion within the first quarter (in year-2000 $). And April is so flat as to be essentially zero.

I think I am sorry I brought the subject up.

It would in any case be a mistake to make much of these numbers. The reason the Commerce Department’s Bureau of Economic Analysis doesn’t report monthly numbers is that the data are so unreliable, and subject to revision. For anyone who needs some sort of estimate of monthly GDP, as we do on the NBER Business Cycle Dating Committee as an input into our thinking, this is what we have to go on. But one sees here yet another illustration as to why the BCDC waits a long time, until all the data are in, before declaring a recession.

Originally posted at Jeff Frankels Weblog and reproduced here with the author’s permission.

6 Responses to "Did GDP Fall Within the 1st Quarter or Not?"

  1. Guest   June 20, 2008 at 8:00 am

    Is the BCDC meeting already? What is their current thinking about the recession? Employment has already fallen for five months in a row and those figures may be revised downward once the birth/death model rebenchmarking occurs. So arent we already in a recession?

  2. Anonymous   June 20, 2008 at 8:03 am

    Professor Frankel, what do you make of this WSJ article today? It certainly smells like a recession…it passes the duck test…walks and quacks like one…http://online.wsj.com/article_print/SB121392283831790555.htmlAHEAD OF THE TAPE By MARK GONGLOFF Wall Street JournalKey Data Still Suggest A RecessionJune 20, 2008; Page C1One spark for the recent selloff in bonds was an assumption the economy would dodge a recession. That’s no sure thing.Recessions get called by the National Bureau of Economic Research, a group of number-crunchers who focus on gross domestic product (a measure of economic output) and four other gauges. GDP has been barely growing, while the other indicators have already peaked. The only question is whether they’ll fall deep enough and stay down long enough to make this an official downturn.The first, nonfarm payrolls, topped out in January and have since shed 324,000 jobs, or 0.2%; not huge, but enough to return them to their August 2007 level, meaning the economy has created no net jobs in nine months.The second is personal income, minus "transfer" payments such as Social Security checks. That peaked in December and was down 0.1% through April; again, not terrible, but no help for consumer spending, the economy’s life-blood. Tax-rebate checks provide temporary spending relief, but higher food and energy prices are mopping that up.The third and fourth indicators, industrial production and manufacturing and trade sales, have less weight but have fallen harder. Production peaked in January and has fallen 1.4%. Sales peaked in October and were down more than 3% through March, the latest data available.The bureau also watches a monthly GDP index compiled by private researcher Macroeconomic Advisers. That peaked in January and fell 0.2% through April; the jury is out on the rest of the second quarter.These dials point to an economy muddling through and at risk of worse. That makes the recession/not-recession argument academic for many Americans and for the markets.

  3. John   June 22, 2008 at 7:53 pm

    After this past week markets’ plunge fears of a recession are rising again. It certainly feels like we are in a recession. And now rising inflation is leading to a double risk, recession and inflation. Sounds like staglflation to me.

  4. Guest   July 8, 2008 at 10:10 am

    According to Macro Advisors GDP has started to fall in monthly data since February. So are we in a recession? It looks like one

  5. Jeff Frankel   July 8, 2008 at 8:26 pm

    I appreciate the added exposure that RGE has given my blog by including me among its authors, and I especially appreciate the opportunity to read and respond to comments posted by readers — unencumbered by the massive spam I was receiving on my own blog site.First, I should clarify that I revised my blog post immediately after the version that is reproduced above. It is now titled "Did Estimated GDP fall within the first quarter?" and the ultimate answer is yes, but just barely. The question turns on semantics to an even greater extent than Feldstein had in mind when he made his original point. Second, in response to these comments: the NBER BCDC always waits until well after the fact, until the answer is clear for all to see, before declaring a turning point. Although the members of the Committee have been talking to each other, we are nowhere near making a call. Despite the indication from employment that a downturn began around January, we have not yet had a single negative quarter on GDP (quarter-to-quarter). Thus the answer is not at all clear. Furthermore, even if the GDP numbers had come in differently in the first quarter, we would still be waiting quite awhile before calling a recession, because the numbers are so often revised substantially. Our goal is not to be quick, but to be definitive.

  6. Guest   October 29, 2008 at 10:09 am

    I am looking for a spreadsheet of monthly GDP figures, does anyone know where I can find such information?