We officially didn’t enter a recession in 2007: GDP growth for the fourth quarter was positive, albeit very low at 0.6%. The main engine of growth is still consumer spending, rather than exports, but it’s slowing, contributing 1.4 percentage points to GDP growth, balancing out housing, which subtracted 1.2 percentage points. The best news, I think, comes on the spending and inventories front, with business spending rising 7.5%.
In the end, and with hindsight, I think the US can count itself lucky to get away with 2.2% GDP growth for 2007. If we manage anything like that for 2008, it’ll be a miracle. David Leonhardt today calculates what this all means for Ben Bernanke:
If the real estate slump does lead to a nasty recession — or even just 18 months of slow growth and rising unemployment — it may not matter what Mr. Bernanke does. By reappointing him, a new administration would be tying itself to the Bush administration and the housing bust.
Keeping one’s job is a big motivating factor for anybody. So expect a 50bp cut later this afternoon.