Friday, August 01, 2008

Measuring the Economy


clipped from blogs.wsj.com
most consumers, along with a big slice of the economics profession, believe the economy, under the weight of ongoing housing strains and financial market tumult, is in recession.
The problem remains, however, that much of the data continues to tilt against that view. This week is emblematic of that curious environment, which also explains why the Federal Reserve can keep interest rates steady and not cut them further.
For those who want to argue against the recession view, a number of top tier reports this week provide ammunition. Most notably, overall growth in the second quarter posted a 1.9% annualized increase, on top of the first quarter’s 0.9% gain. While that’s clearly not gangbusters growth, it’s still an expansion and not a contraction. A general rule of thumb defines a recession as two quarters of contracting growth.
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More thoughts on the economy. Even though the economy is sluggish, it's not a recession. The tax rebates are helping. Energy prices have fallen the past few weeks, and that'll help, too.

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