Archive for March 31st, 2008
Using GDI vs GDP
Great piece @ the Big Picture. Here is an exerpt.
“Last year, Fed economist Jeremy Nalewaik suggested a different measure: GDI, or Gross Domestic Income. Nalewaik argued in a 2007 paper that GDI “has done a substantially better job recognizing the start of the last several recessions than has real-time GDP.”
According to Nalewaik, GDP-based models did much worse at forecasting recessions than did GDI: The past four recession odds at their actual starting points were only of 52%, 40%, 45% and, for the 2001 recession, just 23% according to GDP data. The alternative measure of GDI did much better, signaling odds of a recession of 78%, 44%, 72% and, for 2001, 70%.
And what of today? Recent data shows an annualized GDI decline of 1% — its largest drop since the 2001 recession.”
