Wednesday, January 30, 2013

Does Negative GDP Growth Portend Recession?

While it was generally expected that 4Q was a slow quarter for economic growth, it was probably a surprise to many that the growth rate was negative.  What are the odds that this negative growth portends a recession?

Assuming that the revised number remains negative this is the 42nd time in 279 quarters since 1947 that quarterly GDP growth has been negative.  Of those 42 times, 27 of them came during a recession (as defined by NBER).  Therefore GDP has contracted 15 times while the economy was not in recession.  Below is a list of those times.  The economy entered into a recession in the following quarter five out of those fifteen times.

Of course, NBER defines recession dates after the fact, so we could be in a recession right now and just not know it.  Given that the market is hardly lower today, that would probably be a surprising result.

Note: Figures are NON-Annualized

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