Some Recession Talk

Could this guy be right?

1.Inventories — unsold goods — contributed 0.41 percentage points. Final sales rose by just 1.29%. The inventory accumulation will be a drag on future growth.

2. Q1 ’13 growth was revised down from 1.8% to 1.1% (with final sales just 0.17% — virtually flat). The lower Q1 ’13 base (1.8 minus 1.1 equals 0.7) flattered the Q2 ’13 growth number by 0.7 percentage points.

3. Adjusting for inventories and revisions, the Q2 ’13 SAAR growth number was 0.59% adjusted Q2 ’13 growth (1.7 minus 0.41 for inventories minus 0.7 for Q1 revisions equals 0.59%).

Overall, today’s low-but-actually-lower GDP growth numbers pull the US economy down to stall speed. Given the ongoing drag from Q2 inventory build, fiscal austerity, weaker global growth, and higher, taper-talk-driven interest rates, we could well see negative second-half growth.

That defines a recession.

I have my doubts but as I noted yesterday, the ISM numbers for Asia were uniformly bad. Fragile best describes the world’s economy, and in that state things can go downhill quickly.

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