Chart of the Day
Today, the US government reported that gross domestic product (total output of goods and services) contracted at an annualized rate of 0.3% in Q3 2008. The GDP report showed that consumer spending (about 70% of the US economy) declined 3.1% during the quarter which is the biggest decline since 1980. For some perspective on the US economy, today’s chart illustrates the ECRI Coincident Index. This index is a composite of several economic indicators (includes measures of production, employment, income and sales) that provide an indication as to the current state of the US economy. Since 1950, the ECRI Coincident Index has (on average) peaked one month before the beginning of a recession (as measured by the NBER – the official arbiter of recessions) and troughed at the same time that a recession ended. Today’s chart illustrates that the ECRI Coincident Index peaked back in September 2007. This suggests that the US economy has been in recession since Q4 2007 and that the recession is ongoing.