MarketWatch and Rex Nutting Get GDP History Wrong


Those who have followed my posts for a while know that I have a particularly low regard for the work of MarketWatch's Rex Nutting (pictured at right). It goes back to the pre-housing mess days when he tried to tell me that the the drop in housing prices would look like the 75%-plus drop in the NASDAQ from 2000-2002 or the collapse of Dutch tulip prices centuries ago. As of April 2009, according the Federal Housing Finance Authority (FHFA), the successor to the Office of Housing Enterprise Oversight, the two-year drop in housing prices since the April 2007 peak has been 11.2% (PDF). Of course, give the Obama administration enough time, and who knows what it might do to housing values?

After the government's "final" GDP report for the first quarter of 2009 on Thursday (future comprehensive revisions during the next two years could still ultimately change the outcome), it occurred to me that the reported annualized contraction of 5.5%, in combination with the annualized 6.3% contraction logged in the fourth quarter of last year, might be some kind of record. I looked at historical info, and found that the most recent two-quarter dive is the worst since the same quarters of 1957-58. Then in seeing who might have written this up, I came across Nutting's related report, which contains two statements that are patently untrue.

What's remarkable is that one of his errors indicates that he or someone else at MarketWatch must have looked for the numbers in question and, along with his editors (if they exist), blown right by them.

Nutting's erroneous statements in his Thursday MarketWatch report are the first two sentences (bolded by me) in the following paragraph:

The two-quarter contraction is the worst in more than 60 years. Since 1947, the economy had never contracted by more than 4% for two consecutive quarters. With a 0.5% drop in the third quarter of 2008, it's the first time the economy has contracted for three consecutive quarters since 1975.

Both statements are demonstrably false. A review of 1947-2009, the entire period during which quarterly data has been reported (annual data goes back to 1930), shows that the two quarters I cited earlier came in at -4.2% and -10.4%:


The economy's actual (not annualized) contraction during that six-month 1957-58 time period was 3.75%. The actual contraction during the most recent two quarters, after Thursday's revision, has been "only" 3.0%.

How Rex Nutting or someone helping him could have looked at the government's GDP history and missed the fact that both 1957-58 quarters in question had annualized contractions worse than 4% -- something he specifically said has never happened since 1947 -- is a mystery. Additionally, 4Q-1981 and 1Q-1982 had annualized contractions of over 4%, though their two-quarter combined actual (non-annualized) contraction of 2.87% is less than the two most recent quarters.

But there may be a psychological clue in Nutting's sub-headline: "Trivial revisions can't hide enormity of economic collapse."

Perhaps Nutting and MarketWatch have conditioned themselves to believe this is the worst ever collapse already, and contrary data simply can't penetrate their brains.

The current economic collapse isn't the worst -- yet. But again, give Barack Obama and Congress enough time, and they could very well get us there. Look what they've done since they started trashing the economic expectations of investors, businesspeople, and entrepreneurs a year ago.

Nutting reveals elsewhere in his report that predictions for the second quarter of this year are currently for another contraction, this time at an annualized rate of 1.5%. If that occurs, it will be the first time ever that four quarters of contraction in a row have occurred since the government began keeping quarterly data. It will be interesting to see if Nutting maintains his gloom or, given further progress into the Obama administration, whether he'll try to put a happy face on things like so many of his business-press colleagues.

Cross-posted at

UPDATE, June 29, 2PM: The MarketWatch reporter has entertainingly responded at BizzyBlog, and I have dished back.  

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