Another Blow to ECRI’s Recession Call

It’s still too early to say whether Lakshman Achuthan and his cohorts at the ECRI (Economic Cycle Research Institute) will ultimately be proven right or wrong on their bold call last September that the U.S. will begin a new recession by mid-year in 2012.

But, anyone who keeps track of this sort of thing might want to refer back to this appearance in early-December by Achuthan on Bloomberg Surveillance in which, beginning at about the five minute mark, he goes on at great length about how GDI (Gross Domestic Income - the other half of the GDP report) is a more accurate measure of economic growth and that it portends doom.

Well, look what’s happened to GDI over the last few months (via this story at the New York Times):

Achuthan goes on for about two minutes talking about how GDI is better than GDP and how the Federal Reserve says GDP normally gets revised toward GDI, not the other way around. He also notes that the most recent reading of GDI at a 0.3 percent rate (in Q2) is “a big red recession signal”.

If so, what does that massive 4.4 percent growth rate in Q4 mean?

4 Responses to Another Blow to ECRI’s Recession Call

  1. Jim Beam March 30, 2012 at 3:18 PM #

    Someone needs to tell Mish about this right away. He’s not gonna like it.

  2. Scott Frew April 4, 2012 at 4:36 AM #

    Tim, this may, emphasis on may, not be the blow to the recession call that you suggest. Note Dean Baker’s comments suggesting that capital gains slip into the gdi calculation and are counted as ordinary income, which may explain some of the variation between gdi and gdp at the moment.


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