Article Source The President's press conference yesterday was meant to buttress consumer and investor confidence. I will leave it to others to evaluate whether he was successful in this endeavor [0]. I will also ignore his disingenuous remarks concerning how allowing drilling offshore and in ANWR [1] would somehow affect gasoline prices today in a noticeable manner, and focus instead on his repeated emphasis on the fact that the economy is still growing (although he never mentioned at what pace). This statement is indeed accurate if one focuses on real GDP. I present the log of real GDP in Chained 2000$, normalized to 0 at the NBER-defined trough in 2001Q4. I also present for reference log GDP in the previous two expansions, normalized to 0 in the previous troughs in 1991Q1 and 1982Q4. (For those interested in output gaps, the mean WSJ forecast predicts output will be ...

Article Source Over the past few days, I've been trying to identify appropriate measures of the output gap (and trying to relate that to exchange rate changes). As I've done so, I've come to realize that (1) it's a difficult thing to do, and (2) interesting stories come out of different measures. The easiest thing to do is to pull down the CBO's measure (interpolated to quarterly frequency). This yields the following picture (in logs): Figure 1: Log real GDP (Ch.2000$, SAAR) (blue line), and log potential GDP. NBER-defined recession dates shaded gray. Source: BEA, GDP release of 29 May 2008, and CBO, Update of CBO's Economic Forecast (February 2008), data [xls], and NBER. Two observations: (i) recessions do not necessarily coincide with negative output gaps (although they do seem to coincide with the beginning of periods of ...