Tag Archives: GDP

U.S. Economy Shrinks 3.8%….

30 Jan

…in Q4 2008. A better than expected performance, according to the market reaction this morning, but there is not much of a way to spin this story positively.

In previous downturns in America, Europe and Japan in the 1980s and 1990s, I came up with my own personal rule-of-thumb to gauge the scale of a downturn. I call it the Forman Retail Index, and here is how it works:

An up economy sees new stores opening, sometimes pretty frequently and obscurely (e.g. “Another high-end soap store is opening? That’s the third on the block!”)

A flat economy sees as many stores opening as closing.

An economy shrinking in at a single-digit pace translates into one out of every three shops empty. Anything worse than that: the shop windows of entire city blocks are bare.

If the Q4 pace is the trough, we may not see more lights going out. Let’s keep our fingers crossed.

But this morning’s positive spin (some economists were expecting a 5% rate of decline) reminds me of the Richard Farina short-story collection of the 1960s: “Been Down So Long It Looks Like Up to Me.” The Doors made it a song, which in retrospect was a pretty productive thing to do.

(Postscript: Commerce Department announced week of 22 March 2009 that the final Q4 number was revised downward to 6.3% decline.)