If an economic recovery starts slowly, will it remain a limpid recovery? Much is being made of the small increase recorded by the first-quarter growth in real gross national product (GNP) - the output of goods and services - in describing the subdued character of the economic recovery now widely believed to be under way in the United States. But the first-quarter rise of GNP in an economic recovery does not tell us what the first year of recovery may ultimately look like. Some recoveries start slowly and speed up, some start fast and slow down.
Only three times in the seven previous post-World War II economic recoveries in the US has the relative improvement in GNP in the first quarter of a recovery correctly revealed the relative improvement of GNP after a full year of recovery. On a fourth occasion, the first-quarter performance came fairly close to suggesting its full-year achievement. In the three remaining recoveries, GNP did not end up as its start might have suggested.
The fact is that GNP's performance after even two quarters of economic recovery is not much better as an indicator of its behavior over the first year of recovery as a whole than after one quarter.
Probably what is most remarkable about GNP is that its improvements after two quarters of economic recovery have been so similar, regardless of what its first-quarter performances have been.
With the exception of the recovery after the 1948-49 recession, one that involved a major buildup related to the Korean war, the two-quarter recovery improvements in the six remaining recoveries were all within a half-percent of one another from the strongest to the weakest.
From the earliest recovery (1954) to the latest recovery (1980), the two-quarter increases were 3.3 percent, 3.1 percent, 3.0 percent, 3.0 percent, 3 .5 percent, and 3.0 percent, respectively.
A funny thing about GNP is that for all its popular acceptance as the most all-encompassing economic statistic, it sometimes behaves most peculiarly.
For example, in this last recession, the longest of all the post-World War II downturns and one that lasted for 17 months, GNP only fell for two quarters (six months).