The new GDP numbers also allow us to update our recession probability index. This is a simple pattern-recognition algorithm that looks at whether the recent behavior of GDP looks more like what typically happens in an expansion or a recession. ....With the just-released 2007:Q2 data, we are in a position to make the call for 2007:Q1. The growth rate for that quarter is now reported to have been 0.6%, and it followed a string of weak growth rates in 2006. As a result, the value of the recession probability index for 2006:Q1 turns out to be 26.2%, its highest value since 2001:Q4.
Note that this inference does make use of the strong 2007:Q2 advance estimates-- had 2007:Q2 growth been weaker, the inference for 2007:Q1 would have been even more pessimistic. All of which is a reminder that the latest GDP numbers do not prove that we're out of the woods yet.
Or, the data is about three times higher that we aren't even in the woods at all.
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