I am amused by those who think a US recession will come within a year. Even more amusing are those who think a recession will not come at all.
The US is in a recession now. I am not the only one who thinks so.
Last Friday, I received an email from Rick Davis at Consumer Metrics, complete with an Excel spreadsheet that shows that had the GDP deflator been based on the consumer price index (CPI) rather than the BEA's measure of price inflation, the US would already be in the second quarter of contraction.
At which point my head started to hurt, in the exact location and intensity it did when I was back in college, trying to understand basic economics.
The gist here, though, isn't too hard to grasp. The way you get to an accurate GDP number is to take the Nominal GDP -- which is calculated in current dollars, with no adjustment for inflation -- and then, you know, adjust for inflation.
But the government, because it's so smart, has several different ways to calculate inflation -- two from the Bureau of Economic Analysis, one from the Bureau of Labor Statistics. That last one, from the BLA, is what we use to calculate the Consumer Price Index. And if you use that as your inflation index to adjust the Nominal GDP, you get negative growth. In other words, recession:
I have been talking about a global slowdown for a long time. My only concern was if and when the NBER would agree to admit the obvious. I still do not know, but as I have stated before, I expect the NBER to backdate the recession to this quarter or next.
And then he adds, because he's an economist:
That is a guess, not a certainty.
True enough. And yet.