The 0.6 ppt growth rate [SAAR] reported in the 2008Q1 advance release seemed to validate the President's assertion that we're not in a recession, discussed in this post.

Jim has discussed the release in depth, so there is not much to add. Although,the fact that inventory accumulation -- at 0.81 ppts -- more than accounts for total growth at 0.6 ppts is a little disquieting.

What I'd like to reiterate is that this is the advance release. As I observed back in August 2006, one doesn't usually know whether one's in a recession or not because the data are subject to so much revision. From "Could it be that we're already in a recession? Lessons from the last episode":

It's useful to recall that, not only are almost all macroeconomic series announced with a lag, NIPA announcements are also are revised twice after the first announcement ("advance", "preliminary", "final"). There is also a comprehensive annual revisions that go back several years that occur in July. the NIPA announcements provide information on the size of the revisions (mean change, standard deviation). The latest NIPA release of July 28th reports that the standard deviation of revisions from advance to final is 0.4 percentage points on an annualized basis; and 1.0 from advance to latest.

Compounding the difficulties associated with tracking the cycles in the economy, these revisions appear to be larger around turning points. Recalling the the period before the last recession (dated by NBER Business Cycle Dating Committee as January March 2001 to November 2001), I thought it would be useful to compare the data of the time against what we now think are the measures of macroeconomic performance.

Figures 1-3 denote the annualized growth rate (in log terms) of real GDP, real consumption, and real business fixed investment; the blue (red) line is the May 2001 (May 2006) vintage of data as provided by the Philadelphia Fed's realtime database.

Figure 1: Annualized quarter-on-quarter growth rate of real GDP (in log terms). Source: Philadelphia Fed's realtime database, St. Louis Fed, and author's calculations.

Figure 2: Annualized quarter-on-quarter growth rate of real consumption (in log terms). Source: Philadelphia Fed's realtime database, St. Louis Fed, and author's calculations.

Figure 3: Annualized quarter-on-quarter growth rate of real business fixed investment (in log terms). Source: Philadelphia Fed's realtime database, St. Louis Fed, and author's calculations.

As can be seen from these figures, growth rates were revised downward as more data were incorporated into estimates of macroeconomic aggregates. ....

I recall in May of 2001, looking at the GDP numbers and taking solace from the preliminary 2001Q1 growth rate (which, if you look carefully at Figure 1, was positive). Subsequent data revisions cast a substantially different light on the situation (i.e, that growth rate for 2001Q1 was later negative). The lesson I took from that experience was that a bit of circumspection is a good thing.

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Menzie Chinn

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