Monday, June 1, 2009

Beckworth sees light in the GDI report

I was thinking about this the other day. Thank you David Beckworth at Macro and Other Market Musings blog for doing the leg work, GDI vs. GDP:
Late last year James Hamilton referenced the work of Federal Reserve economist Jeremy Nalewai that shows Gross Domestic Income (GDI) does a better job than Gross Domestic Product in finding turning points leading to a recession. Given all the talk about green shoots, I thought I would take a look at real GDI to see how it is performing relative to real GDP:

This figure shows real GDI experienced a pronounced downturn of -8.2% in 2008:Q4 versus the -6.3 for real GDP. It also shows a sharp bounce back to -3.7% in 2009:Q1 compared to the -5.7% for real GDP. If GDI does as good a job at finding turning points for recoveries as it does recessions then this improvement is a promising development.

1 comment:

  1. Govt. consumption expenditures are included in GDI. Break down the numbers that made up the increase for a true picture. Grasping at straws that turn into green shoots in not helpful.