Thursday, October 21, 2010

In Case Fed Officials Needed More Evidence...

They should look no further than the Macroeconomic Adviser's monthly nominal GDP series.  This is a monthly indicator of total current dollar spending or aggregate demand in the United States.  It shows for August that aggregate spending declined at an annualized rate of decline of  1.69%.  More worrying, though, is that there is a downward trend in aggregate spending over the entire year. This downward trend is consistent with the quarterly forecasts of the Survey of Professional Forecasters that show a drop in the NGDP forecast. Here is monthly NGDP (click to enlarge): 

Now these numbers only go through August.  I suspect all the recent QE2 talk--and its effect on   nominal expectations and thus on current spending--may have to some extent arrested  this downward trend in NGDP.  Still the Fed should not let its guard down come the November FOMC meeting.

1 comment:

  1. cJeffrey Sachs offered up a scathing analysis of traditional Keynesian (non-targeted) fiscal stimulus on Charlie Rose last nite:

    Last week's ECRI declaration of an unavoidable NBER defined recession commencing in Sept/Oct will put pressure on Congress to act rashly. Media piling-on can assault commerce/consumer confidence and make this self-fulfilling.

    My own TRENDLines Recession Indicator gauged Sept GDP @ a 2.0% pace & projects 1.7% for October, with a low point of o.8% in April 2012.

    TRI chart: