Stall Speed

Today’s big news was a revision by the Commerce Department of its previously reported Gross Domestic Product figures. Originally the economy was said to have grown +0.6% in the first quarter. Now they say it grew +0.9%. This is important if you care whether or not the U.S. is in a recession, since “recession” is typically defined as “two consecutive quarters of negative GDP growth.” So there you have it: recession is not yet upon us. We suspect the 372,000 Americans who filed for unemployment benefits last week are probably not celebrating just yet.Numbers like this often elicit colorful quotes from financial pundits. For instance, Harvard economist Jeffrey Frankel said the economy is “like an airplane at stall speed, just skimming above the water.” Michael Feroli of JPMorgan Chase says “we are somewhere in the twilight zone between an expansion and a recession.” And Sal Guatieri at BMO Capital Markets expects “the economy will be pretty flat on its back through much of this year.” First prize, however, goes to Joseph Zock of Tocqueville Asset Management, whose optimism found its expression in a variety of metaphors: “There’s a general sense that banks are healing their wounds… they’ve been battered for a long period of time… The Street is catching on that this is not the end of the world.”

Whoever you believe, the GDP figures inspired only a small rally in stocks today. Bonds plunged, however, with the 10-Year Treasury yield trading as high as 4.14%, its highest point so far this year. This suggests traders are growing more concerned about inflation, despite a pullback in energy prices.