Menzie Chinn: What the Data Tell Us About the Shape of the Recession
A fine job of intellectual garbage collection by Menzie Chinn:
Econbrowser: The 10Q2 Advance GDP Release: Cautionary Notes from Revisions: The release was accompanied by an annual revision of data extending back to data for 2007Q1. This revision alters our understanding (or lack of understanding in the cases of certain people) of the evolution of this recession. Here are the points I gleaned.... First, it is generally unwise to make definitive statements such as Donald Luskin's September 14, 2008 assertion that "...anyone who says we're in a recession, or heading into one -- especially the worst one since the Great Depression -- is making up his own private definition of "recession."... Then CEA Chair Ed Lazear's statement "The data are pretty clear that we are not in a recession" is slightly less egregious because he was speaking on May 8, 2008, before a lot of the weak data had been reported. And implicit in his statement is the point that he was referring to the data at hand. But of course he knew the data were going to be revised ... repeatedly.... Second, this is indeed the deepest recession since the Great Depression, notwithstanding Professor Casey Mulligan's assertions.... this last recession was much, much worse than this 1980-82 "recession" Professor Mulligan alludes to. In addition, we came close to the 11 trillion (Ch.2000$) floor that he insisted we wouldn't breach (I calculate 2009Q1 GDP when expressed in Ch.2000$ was 11.378 trillion, using a conversion factor of 0.88648, as explained in this post.) And Professor Mulligan's October 2008 forecast was not conditioned on any stimulus package.... Finally, the revisions provide additional information regarding the amount of slack in the economy: namely the output gap is now bigger than we were given to understand before.... In 2010Q1, the output gap was 6% (in log terms) using the pre-annual revision data. Using the post-revision data, the 2010Q1 output gap is now 6.8%, using CBO's January 2010 estimate of potential GDP.... Given this, it is no wonder that inflation indicators are muted. As I said, we should've had a bigger stimulus....
To the extent that investment is rebounding that's a sign of some optimism about the future on the part of the private sector; increased capital goods imports is a reflection of that phenonenon -- that's about the only positive I saw in the report. However, even that positive is tempered by the fact that equipment investment remains 8.7% (log terms) below peak levels in 08Q1...
