LAKSHMAN ACHUTHAN: Yes, It's Possible To Be In A Recession With GDP Growth At 2.5%

Earlier today, we learned that real GDP grew at a 2.5% rate in Q1.

While this was much lower than the 3.0% growth rate forecasted by economists, it still seems to be a clear indicator of economic growth.

But not everyone sees it that way.

Lakshman Achuthan of the Economic Cycle Research Institute has long argued that the U.S. economy slipped into a recession in mid-2012.

And he is convinced that we continue to be in a recession now.

We asked Achuthan how today's GDP report fit into his thesis. Here's his response:

So, with U.S. GDP growth at 2.5%, how can we be in recession?

Few realize that GDP data for almost all the early quarters of recent recessions have been revised down dramatically.

Recall that the GDP release on August 28, 2008 – with the economy eight months inside the Great Recession – revised Q2/08 GDP growth to 3.3% from 1.9%, up from 0.9% in Q1/08. But both of those data points, as well as GDP data for the first two quarters of the 2001 and 1990-91 recessions, were revised by 2 to 4 percentage points over time. This is how real-time data often behave during recessions.

Furthermore, yoy nominal GDP growth at or below 3.7% has occurred only in recessionary context. Q1 2013 read is 3.4%, the second straight quarter below 3.7%.

In summary, revisions have historically been negative, real GDP appeared to grow handily in the last recession, and nominal GDP (which combines real GDP with inflation) is still very low.