Monthly GDP declined 0.8% in January, setting up the first quarter for a soft reading. The sharp decline in January reflected declines in final sales and inventory investment. Within final sales, real PCE was weak, in large part reflecting a weather-related decline in consumption of electric and gas utilities. Also pulling down final sales was a sharp decline in state-and-local construction and a large increase in imports. Nonfarm inventory investment fell in February, the second consecutive decline following an elevated level in November. The level of GDP in January was 1.6% below the fourth-quarter average at an annual rate. Implicit in our latest forecast of 1.3% GDP growth in the first quarter is a sharp, 1.0% increase in monthly GDP in February and a solid, 0.3% increase in March. Click here for more information on MA’s Monthly GDP measure.
MA’s Ben Herzon was quoted in the article, “Is the Economy Overdue for a Recession” by Annie Lowrey of The Atlantic (excerpts shown below). Recessions do have a way of coming around every six or eight or ten years. But economists caution against confusing the length of an expansion with its maturity, and against conflating historical probabilities with forward-facing predictions. There’s no reason the current spell of growth could not outlast the Trump administration, they say. Expansions don’t die of old age. “This is a really long expansion,” said Ben Herzon, a senior economist at Macroeconomic Advisers, a St. Louis-based economic research firm. “But the length itself does not tell us anything about the likelihood of a recession in the next year, or five years.” Still an economy close to full employment, which the United States seems to be, tends to grow for a shorter period of time than an … Continue Reading