- New Deal democrat
It's been a full year and a half since ECRI said a recession was either already happening or would happen in a few months. As if to mark the occasion, the BEA served up another haymaker yesterday.
In one of his early appearances in support of the call, Lakshman Achuthan touted the superior reliability of "gross domestic income" vs. gross domestic product. As Tim Iacono recounted at the time:
[A]nyone who keeps track of [ECRI's 2011 recession call] might want to refer back to this appearance in early December by Achuthan on Bloomberg Surveillance in which, beginning at about the five minute mark, he goes on at great length about how GDI (Gross Domestic Income – the other half of the GDP report) is a more accurate measure of economic growth and that it portends doom.Well, yesterday as part of the third estimate of 4th quarter 2012 GDP, BEA reported on GDI:
Real gross domestic income (GDI), which measures the output of the economy as the costs incurred and the incomes earned in the production of GDP, increased 2.6 percent in the fourth quarter, compared with an increase of 1.6 percent in the third. For a given quarter, the estimates of GDP and GDI may differ for a variety of reasons, including the incorporation of largely independent source data. However, over longer time spans, the estimates of GDP and GDI tend to follow similar patterns of change.The BEA also said that:
Real GDP increased 2.2 percent in 2012 (that is, from the 2011 annual level to the 2012 annual level), compared with an increase of 1.8 percent in 2011. .... Real GDI increased 2.0 percent in 2012, compared with an increase of 1.8 percent in 2011.So, if GDI is more reliable than GDP, and unlike the +0.4% GDP, we should be looking at the +2.6% GDI as the more reliable estimate of economic performance in the last quarter of 2012, then there is very little chance that it marked the onset of any recession. And instead of decelerating over time, which is ECRI's central thesis, the economy actually accelerated in 2012 vs. 2011.
P.s.: real personal income minus transfer receipts also rebounded back above its summer 2012 levels in January. That means that all 4 of the main coincident indicators used to determine if the economy is expanding or contracting -- industrial production, real retail sales, employment, and real personal income less transfer receipts (ex- the December blip) -- are at new post-recession highs.