Business Cycle Indicators, July 1

IHS-Markit’s monthly GDP declined in seven months. Some key indicators followed by NBER BCDC:

Figure 1: Nonfarm payrolls (dark blue), Bloomberg NFP consensus (blue+), industrial production (red), 2012 dollar non-transfer personal income (green), 2012 dollar manufacturing and trade sales yr (black), consumption in Ch.2012$ (light blue) and monthly GDP in Ch.2012$ (pink), all logarithms normalized to 2020M02 = 0. NBER recession dates, from peak to trough, shaded in gray color. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (née Macroeconomic Advisors) (issue 07/01/2022), NBER and author’s calculations.

We now have two out of five key indicators falling in May. Monthly GDP has been declining for seven months. On fig. 2 shows the trajectory of monthly GDP for different years of production.

Figure 2: Official GDP (blue bar), IHS-Markit monthly GDP (lines), IHS-Markit implied monthly GDP for June 2022 (red square), all in billions of 2012 US$ CAAP. Source: BEA Q1 Issue 3, various editions of IHS Markit.

Note the differences in monthly GDP estimates.

IHS-Markit notes in today’s weekly commentary:

According to our estimates, GDP fell in both the first and second quarters at about the same pace. The Bureau of Economic Analysis estimates that GDP fell 1.6% in the first quarter; We estimate that GDP fell 1.5% in the second quarter based on the latest monthly data on international trade, consumer spending, inventories and other sources. A two-quarter decline in GDP responds popular definition of a recession. However, the first half of the year was not as weak as shown in the GDP figures (including our estimate for the second quarter), and we think it is unlikely that the official arbiter, the NBER Business Cycle Dating Committee, will consider the projected decline in GDP in the first and second quarter quarters as satisfying them recession definition this includes “a significant decline in economic activity that is economy-wide and lasts for more than a few months.”