Recessions NORMALLY start with positive GDP

Barry Ritholtz at the Big Picture came up with a good challenge yesterday

"Have there been past recessions where GDP was originally reported as a positive number?"

Not only is the answer a resounding yes, but in fact it is NORMAL for a recession to start with a positive GDP quarter. Here is what GDP was orginally reported to be in the first quarter of 4 of the last 5 recessions.

By contrast the fourth quarter of 2007, looks weak. I expect it to be revised to a negative number. Just as the start of the '73, '90 and '01 recession all were. 

By the way the first quarter of the massive '80 recession and the first quarter of the 1948 recession are both still positive numbers. The first quarter of the '48 recession was reported to be above 3% by the BEA for over 30 years. (It was lowered to 0.5% in 1996 when the price deflators were changed from fixed weights to chained weights)

But could the first two quarters of a recession ever be positive?  Right now we have back to back 0.6% quarters. Has anything like 2 positive quarters been revised and labeled a recession? YES. In the chart below the first two quarters are what was announced in late July of 2001. The first quarter number had now been published 4 times!  And it remained a positive number.  In that same July 2001 report, the second quarter of 2001 is released for the first time and it too is a positive number.  Both of these 2 quarters would remain positive for another YEAR. Not until July of 2002 would both of these quarters be revised to negative numbers. So our two positive quarters today could easily be within a recession.

But wait didn't the NBER announce the recession in November of 2001?  Yes they did.  NBER annouced the recession started in the first quarter of 2001 and at the time, both the first quarter and the second quarter of 2001 were thought to be POSITIVE GDP quarters.  NBER ruled a recession when the quarters were +1.3%, +0.3%, and -0.4%.

How's that for the back - to - back negative quarter myth?

NBER likely felt vindicated when 9 months later BEA revised those three quarters to -0.6%, -1.6%, and -0.3%. But as of 2004 (another revision) the 2001 recession does not have back to back negative quarters. Today the recession appears to start 6 months earlier in the 3q of 2000.

2000q3  -0.5% (this quarter was first reported as 2.7%)
2000q4  +2.1%
2001q1 -0.5%
2001q2 +1.2%
2001q3 -1.4%

Those who may be crowing about positive GDP means we can't be in a recession, have poor memories and haven't done their homework.

I was happy to spend some time with Barry on the phone yesterday as we worked thru this data and I send him my spreadsheet of GDP real time data.  The original data came from the Philadelphia Federal Reserve, as they track it "real time" from 1965 to today.

Today Ritholtz Research will file a similiar report in their research notes and on his blog "The Big Picture", and hopefully get on TV to bring these points to a larger audience. Give 'em hell Barry.