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: Consumers say they're gloomy, but why are they still spending? A surprising report from the Commerce Department today, which indicated that seasonally adjusted nominal sales for retail trade and food services were 1% higher in May compared with April. The new estimates of March and April sales (in red in the figure below) were also revised substantially up from the previous (blue) estimates that had been reported last month. Source: ALFRED Although a 1% monthly gain would translate into a 12% annual rate if maintained, the newly revised April numbers are still barely above the values last November in nominal terms. Calculated Risk notes that the year-on-year comparisons, when adjusted using an anticipated PCE deflator, remain negative even with the strong new estimates. Source: Calculated Risk The latest numbers ...

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 ...

Article Source Since December 2007 is a commonly identified turning point [1], [2], I thought it would be of interest (given Jim's take on whether it matters if we're in a recession) to see what the indicators that the NBER BCDC focus on -- payroll employment, industrial production, real personal income less transfers, real manufacturing and trade sales, and to a lesser extent monthly real GDP -- are doing. They're declining... Figure 1: Log payroll employment (blue) and log industrial production (red), both normalized to 0 in 2007M12. Green shaded area is conjectured recession dates. Source: Federal Reserve Board via St. Louis Fed FRED II, accessed 8 June 2008. Figure 1: Log personal income less transfers in Ch.2000$ (blue) and log manufacturing and trade sales in Ch.2000$ (red), both normalized to 0 in 2007M12. Real personal income calculated by subtracting ...

Soaring oil prices were mostly to blame for the past week’s stock market sell-off, but renewed concerns about US economic growth, corporate earnings and mounting angst about inflation pressures also featured prominently in determining the market’s fate.

David Fuller (Fullermoney) commented as follows: “As the world’s most important commodity by far, this surge in the oil price is bearish for the majority of stock markets. Consequently I would assume that rallies seen since March have either been capped or are unlikely to make much upward progress until investors see evidence that crude oil has commenced a medium-term correction.”

The FOMC released the minutes from its April 30 meeting on Wednesday. Members acknowledged uncertainty about what constituted

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