Concerning that 3.2% GDP Growth Figure…

Bob Bronson takes a closer look at the 3.2% GDP growth recently reported, only to discover that statistical sleight-of-hand was used to hype non-existent growth (For a look at some interesting charts pertaining to growth and the likelihood of a double-dip recession click here, then click on one of the charts that comes up in your browser):

“They’re at it again.  Permabulls and new bulls promoting the notion that a deep or sharp V-shaped recovery is well under way, using just-reported Q1 GDP data for support.
Instead of noting that the headline figure of 3.2% annualized growth was down 40+%  from the Q4 growth rate of 5.6%, showing sharp deceleration in the so-called economic
recovery, they’re saying that Q1 was the third consecutive quarter of positive growth following three quarters of negative growth, suggesting a picture of a balanced V-shaped
recovery, precluding a double dip recession.

“In fact, the GDP growth rate previously declined four quarters from its Q2 ’08 peak and six quarters from the NBER designated start of the recession in Q4 ’07.   Moreover, it declined seven quarters from the Q3 ’07 peak of what we define and carefully track as the core business cycle – see the first chart below. Still further, the shape of the recovery is much worse than suggested by even seven down quarters followed by three up quarters, since the rebound to date has retraced only 17% of the total decline, rather than the 42% suggested by a picture of a three-sevenths or greater retracement.  

“Both permabulls and new bulls know, or should know, that a double dip recession, with its W-shaped bottom, starts with a V and is followed by a second V, so in any
event the characterization of a V-shaped bottom doesn’t at all preclude much more complexly extended bottom formations. But our work shows that even a double-dip, or W-shaped bottom, is likely not all it will take to finally end this deflationary economic Supercycle Winter. To fully end it, we expect three V–shaped troughs over the next four to five years in what we call after-shock, double double-dip recessions, as we more broadly forewarned in this 12/23/06 article: Are You Prepared for the First of Three Perfect Storms…

“The second chart below illustrates the Q1 GDP update of our working model of the  double double-dips we expect, followed by a range of possible similar shapes of
what can be more broadly thought of as a very wide U-shaped trough, or \____/ , rather than even the upside-down square root sign  that only a few economists
are expecting, as compared to the deep and/or sharp V-shaped and eventually self-sustaining recovery that the current consensus of them expects.”

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