Vitner of Wachovia sees recession without negative GDP

According to Mark Vitner, senior economist at Wachovia, the U.S. economy might just skirt a decline in real GDP but will nevertheless be in a recession because of continued decline in business spending and purchases of consumer goods.

We think we are in a recession right now, but I don't know if we see a negative GDP number at all in 2008.

Real final sales declined by 0.2 percent AR, when you add back in the improvement in the trade deficit it is actually down by 0.4 percent. So the economy that matters most to consumers is actually declining, consumer spending on goods and business fixed investment.

I think that you can have a recession without having a decline in real GDP. Its never happened before but I do think its possible ( see Mike Darda). We could see 4 out of 5 quarters with negative final sales to domestic purchases. We would see a decline in domestic demand but because of the improvement in the trade deficit, which is correcting from 6 percent to 3 percent of GDP, that could keep overall GDP growth in positive territory, even so consumers and businesses actually see final demand decline.

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excerpts from the Bureau of Economic Analysis, National Economic Accounts
GROSS DOMESTIC PRODUCT: FIRST QUARTER 2008 (ADVANCE):

Real personal consumption expenditures increased 1.0 percent in the first quarter, compared with an increase of 2.3 percent in the fourth. Durable goods decreased 6.1 percent, in contrast to an increase of 2.0 percent. Nondurable goods decreased 1.3 percent, in contrast to an increase of 1.2 percent. Services increased 3.4 percent, compared with an increase of 2.8 percent.

Real nonresidential fixed investment decreased 2.5 percent in the first quarter, in contrast to an increase of 6.0 percent in the fourth. Nonresidential structures decreased 6.2 percent, in contrast to an increase of 12.4 percent. Equipment and software decreased 0.7 percent, in contrast to an increase of 3.1 percent. Real residential fixed investment decreased 26.7 percent, compared with a decrease of 25.2 percent.

Real final sales of domestic product -- GDP less change in private inventories -- decreased 0.2 percent in the first quarter, in contrast to an increase of 2.4 percent in the fourth.



video: Vitner of Wachovia sees recession without negative GDP
Bloomberg,
http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/vT.QFmTuCC14.asf

source: GROSS DOMESTIC PRODUCT: FIRST QUARTER 2008 (ADVANCE)
Bureau of Economic Analysis, National Economic Accounts
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

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