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Friday, February 28, 2014

Are We Now In Another Great Recession?

The government reported that the economy grow at a 2.37% rate in the last quarter of 2013, down from a more robust reading of 4.19% in the 3rd quarter. But, if the government is performing as they do in the early quarters of a recession, they could be overestimating growth by 3.3%, which they did in the first quarter of the Great Recession (GFC).

The Consumer Metrics Institute reports that the government usually gets GDP wrong at the beginning of economic downturns because instead of measuring the real economy, they tend to measure models of what they think the economy is doing instead. This is clearly why they miss so often at the beginning of recessions. Here's what they say:

Given the BEA's "real-time" track record, it is possible that the US economy is currently in a state of flux — with the weakening hinted at in this report both more pervasive and dynamic than the BEA currently understands. Unfortunately if that is true, the official GDP numbers will be among the last places to watch a downside event unfold.

If you're getting your news from the government, well, you just aren't getting what you paid for.