by Calculated Risk on 6/18/2008 04:47:00 PM

From the WSJ Real Time Economics blog: 2008 Recession: That’s All, Folks?

Merrill Lynch economist David Rosenberg ... note to clients — titled “That’s all folks … Real GDP peaked in January” — uses the monthly figure to support his view that January represented the peak of the business cycle.

The monthly data from Macroeconomic Advisers shows a GDP decline of 0.5% in April and shows GDP peaked in January.

The GDP calculation for the quarterly data is the average (not the end) of one quarter to the average of the next. Here is an example, using monthly data:

month 1: 99
month 2: 100
month 3: 101

Quarter 1: 100

month 4: 102
month 5: 101
month 6: 100

Quarter 2: 101

So the quarterly calculation would show growth in quarter 2, even though GDP is declining on a monthly basis.

This is the point NBER's Martin Feldstein recently made in the Financial Times: Misleading growth statistics give false comfort

The recent government report that US gross domestic product increased 0.6 per cent in the first quarter was very misleading. It implied that economic activity was rising in January, February and March. But the increase actually refers to the rise from the average level in the fourth quarter of 2007 to the average level in the first quarter. Monthly data since January indicate that economic activity and GDP have been declining since the start of this year.

I'm not ready to say "That's all folks!", but I do think it's very likely the economy is in recession.