Are we in a recession?

Today, the National Bureau of Economic Research (NBER) - the official research group tasked with dating when a recession begins and ends - will get its first hint of whether the U.S. is in a recession. That’s because at 8:30am, the Bureau of Economic Analysis will publish its first-draft figures for chain-weighted U.S. GDP growth for the first quarter of 2008. Given all the speculation that we have heard in the financial press about whether or not the country is about to enter into, or is already in, a recession, this will definitely be the figure to watch, so don’t miss it. What will it look like? To be sure, the actual chain-weighted GDP release over the past few quarters has looked nothing if not volatile (see below).

However, here are some hints of what the market is expecting:

  • The consensus estimate for 1Q08 annualized GDP growth published by the IDEA group, a market intelligence provider, is an anemic but above-negative .3%
  • As of yesterday afternoon, Bloomberg placed the average of 80 economist estimates at .4%, with a distribution slightly skewed toward higher growth (.5% median, -.8% low, 1.5% max)

Digging a little deeper, 2007 has thus far posted negative growth in three sectors: construction (-12.1%) and finance/insurance (-.3%), which were a related phenomenon due to the subprime bubble, and nondurable goods (-1.1%).

The question is thus whether the strong contraction in the housing market and the financial services sector continued into the first quarter of 2008 without being sufficiently offset by stronger growth in other sectors to prevent the overall economy from dipping into negative growth.

As you can tell from the consensus estimates, most economists don’t seem to think so. We’ll know for sure in the next few hours, so get ready for an exciting day on Wall Street because if the GDP does indeed stay out of the red then this will be a day to remember.

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