Nouriel Roubini: We Are in a "Growth Recession"

Nourie Roubini points out that the import numbers imply a downward revision to first-quarter real GDP growth:

RGE - US Q1 growth likely to be revised to 0.7%: we are already in a “growth recession” range. And Q2 started even worse than Q1.: Based on a variety of data that have come out after the first estimate of Q1 US growth at 1.3%, it is now likely that US growth in Q1 was actually below 1% (probably close to 0.7%); we are thus already into a “growth recession” territory. The revisions of Q1 GDP growth that will push the revised estimate of Q1 growth rate below 1% are: - Lower change in inventories than initially estimated reducing Q1 growth. - Better construction spending than initially estimated increasing Q1 growth. - Much worse trade balance in March than initially estimated reducing Q1 growth

The net effect of these three factors is an estimated 0.7% growth for Q1 (JP Morgan today revised its Q1 estimate downward to 0.8%). Much more seriously, Q2 started on a very weak note for private consumption based on initial estimates of retail sales. I now expect Q2 growth to be closer to 0% or even negative (i.e an outright recession).

Comments

[Ralph]

Roubini has been predicting for some months now (on Larry Kudlow's CNBC show for one) that the subprime loans market was in a bubble and that when it collapsed, the effect on the economy would be significant. This has now come to pass and doubters about his forecasts are looking pretty sick about now.

[Stephen Spear]

Aren't we supposed to call these things "bananas"?

[I.O.Kitov]

Growth rate, even corrected for population, is not a good measure for the evolution of real economy. Better to use annual increments of real GDP per capita, as normilized to the total working age popualtion, i.e. 15 and over.
For illustration of the superiority the following figure
http://www.geocities.com/iokitov/ GDPpcUSA.gif

For the period between 1947 (start of quarterly measurements) and 1995 - the end (or center) of the previous business cycle, the curve has ZERO trend. After 1995, a period of a positive trend has been observed. As a compensation, one can likely expect a negative annual increment in the next few years.
Also, one can expect a decreasing growth rate if the increment does not change.
Same behavior is obsereved in ALL developed countries in the long run.
http://ideas.repec.org/p/pra/mprapa/ 2738.html
http://ideas.repec.org/p/pra/mprapa/ 2739.html

[anne]

No; Nourial Roubini has been predicting the end of the known investing world for at least a year, and the investing world has surely not come to an end as yet. Also, the prediction was for a recession, a real recession in the fall and the recession is not come. There is economic weakness, but moderate weakness quite unlike the predictions. The portfolio predictions have been remarkably wrong and show the need to understand simple conservative portfolio management.

[anne]

Nouriel Roubini did investors a distinct dis-service by simply predicting catastrophe and never explaining in the least how a portfolio could be protected and protective other than by timing.

[me]

"Also, the prediction was for a recession, a real recession in the fall and the recession is not come."

anne, It takes a little longer to play out but I think we are probably in a recession rather than you your rosy outlook for weakness.

How can you deny housing is already in a recession? And since it has been 80% of the growth, it will be more likely of a recession than not.

Employment is no where near as rosy ans the statistics of the BLS show.

[Matt]

Kitov,

Repost your paper on predicting the federal funds rate. I lost the link and want to read it.

[I.O.Kitov]

Matt,

I have only papers on inflation prediction in the USA, France, Austria, and Japan.
You can find them all through my RePEc account:

http://ideas.repec.org/e/pki113.html

If there is a link between inflation and the federal funds rate, one can obtain the latter from the former. I did not try.