Late last year James Hamilton referenced the work of Federal Reserve economist Jeremy Nalewai that shows Gross Domestic Income (GDI) does a better job than Gross Domestic Product in finding turning points leading to a recession. Given all the talk about green shoots, I thought I would take a look at real GDI to see how it is performing relative to real GDP:
(Source: BEA table 1.10, 1.1.4, 1.1.1)
This figure shows real GDI experienced a pronounced downturn of -8.2% in 2008:Q4 versus the -6.3 for real GDP. It also shows a sharp bounce back to -3.7% in 2009:Q1 compared to the -5.7% for real GDP. If GDI does as good a job at finding turning points for recoveries as it does recessions then this improvement is a promising development.
Update: I had my quarters labeled incorrectly in the above paragraph and fixed them.
And the US economy remains in a very strong business cycle contraction, with many elements of the rare debt-deflation process in place-at least in the private sector.ReplyDelete