As Mickey Kaus would say, a new report making big downward revisions in estimates of US economic growth for the last three years “requires further study”. But the likelihood of a renewed recession, starting this quarter or next must now be at least 50-50.
My initial take on the US data is that it shows a declining trend in growth from 1999 onwards, overlaid by an ‘inventory cycle’. That is, when it became clear that the dotcoms were undergoing a meltdown rather than a correction (late 2000), businesses all along the supply chain found themselves stuck with unsalable equipment and stopped ordering, generating the mini-recession of 2001. The end of this process produced the current ‘recovery’. On this interpretation, the real recession, bringing savings back into line with investment etc, is yet to come.

(2/8/02): The Economist has more on this