On Thursday, the Commerce Department reported that U.S. GDP growth in the second quarter of 2008 measured 1.9 percent. That's a sharp uptick from the (newly revised) 0.9 percent growth registered for the first quarter, and considerably better than the (newly revised) 0.2 percent decline in GDP for the fourth quarter of 2007.
Even so, several analysts are taking the new numbers as proof that a recession actually began in 2007. How can this be?
One reason, articulated by Business Week's Michael Mandel, is that the current numbers are likely to be downgraded in the future as more data comes in. So, just as today's report changed fourth-quarter 2007's figures from a positive 0.6 percent to a negative 0.2 percent, so too, perhaps, will the first- and second-quarter figures for 2008 be downgraded. It's possible, then, that we've already had two consecutive quarters of negative GDP growth, which would satisfy the requirements of one popular (but by no means definitive) definition of a recession.
Another reason: Despite the ostensible GDP growth in the most recent quarter, the story inside the numbers is miserable. Consumers kept spending, sure -- but their cash mostly went to pay for food and gas and other nondurable items whose prices have been suffering from severe inflation. And the cash that they used to pay for those goods is likely to have come from the economic stimulus checks -- a one-time boost that may just be papering over the cracks in the economy. Meanwhile, jobless claims hit their highest level in five years.
The only real bright side of the new GDP figures comes from the export side of the ledger. Exports grew 9.2 percent in the second quarter. Exports are keeping the economy afloat.
Trade, in other words, is the current American lifeline.