Recession odds up or down?

It depends on who you're listening to. Former Fed Chairman Alan Greenspan tells NPR that the odds are rising because of a slowdown in fourth-quarter economic growth. "We are getting close to stall speed…and we are far more vulnerable at levels where growth is so slow than we would be otherwise. Indeed it’s like someone who has an immune system that’s not working very well is subject to all sorts of diseases and the economy at this lever of growth is subject to all sorts of shocks," he tells Steve Inskeep in an interview to be heard Friday morning. Not so fast. After the stronger-than-expected retail sales numbers for November, several economists boosted their projections on Thursday for fourth-quarter growth (or gross domestic product). Now let's be clear: The economy is still on life support, but at least the patient is breathing. A contraction in GDP during the October-December period would be a clear signal that we're headed into a recession. From the WSJ's Economics Blog:

Macroeconomic Advisers raised its estimate for GDP growth to 0.9%. The firm, which started the day at 0.1% and was at minus 0.1% on Tuesday, moved its projection to 0.6% due to strong retail sales, then up to 0.8% due to defense-related spending and ultimately 0.9% because non-auto retail inventories rose in October more than previously assumed. Retail sales figures pushed Morgan Stanley’s fourth-quarter GDP estimate to 1% from 0.2%, and then the increase in business inventories pushed the tracking figure to 1.2%. Goldman Sachs had been expecting 1% GDP growth but said the retail sales numbers “were strong enough to flip risks to our [forecast] from the downside to the upside.” Lehman Brothers raised its growth estimate to “close to” 1% vs. the previous 0.1%. “This dramatically reduces the odds of a negative print during the quarter and suggests that second half growth could average as high as 3%,” its economists said.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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