Nine months ago, economists agreed: All systems go. Two months ago, after seven months of crappy worse-than-expected data, economists agreed: headed for a recession. Now, after two months of better-than-expected data, economists agree: future uncertain.
Specifically, economists have determined that there are three possibilities for the future direction of the economy:
- We might already be recovering from a recession.
- We might never have had a recession.
- We might just now be slipping into a recession.
How to handicap these scenarios? Depends what happens next. Check back tomorrow.
WSJ: Recession? Not So Fast, Say Some
“A couple months ago it seemed like we were on the abyss,” said Jay Bryson, global economist with Wachovia Corp., referring to the seizing up of credit markets and the collapse of Bear Stearns. “Things have changed….The numbers we’ve seen recently haven’t been as bad as we were led to believe just a few months ago.”
Wachovia now puts the odds of recession at 45%, down from 90% in April, and expects growth in gross domestic product of 0.6% at an annual rate in the first and second quarters of this year, followed by 1.2% growth in the third and fourth quarters. While he doesn’t expect a recession, he says growth will be very weak through next year…
Mr. Bryson and other economists note that though two main pillars of the economy, the labour market and consumer spending, have faltered, they have not collapsed as they did in past recessions. On Tuesday, the Commerce Department said retail sales fell a slim 0.2% in April from the previous month — a decline due mostly to a steep drop in auto sales. Excluding autos, retail sales climbed 0.5%.
Job losses, meanwhile, have been less severe than they usually are in recessions. And many economists think the government’s earliest estimate of first-quarter GDP growth — 0.6% — will be revised upward. After reviewing the retail-sales data, economists at Global Insight, a Waltham, Mass.-based forecasting firm, predicted the government would increase its assessment of GDP growth in the first quarter to 1% at an annual rate. They forecast continued growth in consumer spending, partly because of tax rebates and stimulus checks.