LIVE FROM GAAS: We're Not in a Recession ... Yet

LIVE FROM GAAS: We’re Not in a Recession … Yet

“Clearly we are in turbulent times.” This was the heady statement that William Strauss used to start off his presentation today at the Global Automotive Aftermarket Symposium in Chicago. Strauss, senior economist and economic advisor at the Federal Reserve Bank of Chicago, was asked to be keynote speaker at the event for a second year in a row. This year, he updated the crowd on the changes that have taken place in the U.S. economy over the past 12 months. Playing off the theme of this year’s symposium, Strauss’ presentation asked the pivotal question: “Will the U.S. and World Economy Shift Forward?”

by Amy Antenora

CHICAGO — “Clearly we are in turbulent times.”

This was the heady statement that William Strauss used to start off his presentation today at the Global Automotive Aftermarket Symposium in Chicago. Strauss, senior economist and economic advisor at the Federal Reserve Bank of Chicago, was asked to be keynote speaker at the event for a second year in a row. This year, he updated the crowd on the changes that have taken place in the U.S. economy over the past 12 months. Playing off the theme of this year’s symposium, Strauss’ presentation asked the pivotal question: “Will the U.S. and World Economy Shift Forward?”

Among the major challenges stressing the U.S. economy today is the housing market. “Residential investment has been the anchor around the neck of the U.S. economy,” Strauss said. Stress in the financial markets is somewhat impacted by the stresses in the sub-prime market today, he added.

While the economy has expanded over the past six years, inflation increased in 2007 and oil prices are at an all-time high. Strauss addressed the correlation between crude oil prices and gasoline prices and whether issues such as this are likely to cause the economy to go into a recession. In addition, incomes have pulled back, and we’re beginning to see a downward trend in consumption. While we’re coming close, Strauss said he does not believe we are currently in a recession.

Last year, Strauss warned of a slowdown in p rod uctivity, however he said it has come back quite nicely. While Strauss said he is downbeat for the remainder of the year, he feels optimistic that the U.S. economy is on the path to recovery.

Case in point: Manufacturing output in the U.S. has never been higher. It’s not experiencing the kind of drop that is associated historically with a recession, Strauss said. The Fed looks at manufacturing output, p rod uctivity and other trends as a way of taking the economy’s pulse.

Overall, the economy will have a better second half but even second half performance won’t be near trend, Strauss said.

“The outlook for the second half of this year and for the coming quarter is for growth to continue but we’re certainly skirting near a recession,” said Strauss.