NBER's announcement comes early

What a fiery start for the US markets this December month; a month of holidays, bonuses (if any) and window shopping, or rather dressing! The first day of trading resulted a loss of nearly 9% in a single trading session for the S&P500! This is in stark contrast compared with the performance during the whole of last week- a 12% gain. The selling particularly in the afternoon session is probably due mainly to the National Bureau Of Economic Research's (the economic panel recognised as the arbitrator of business cycles) announcement that the US has entered recession in December 2007 (refer also here) based on its measures of income, employment and other factors.

The NBER's pronouncements historically come long after recessions have begun. (discussed here before in this blog). Yesterday's announcement probably surprised everyone as the US has not fallen into recession yet, technically speaking.(ie continuous 2 consecutive Quarters of negative growth). In fact, basing on the passed announcements, almost all of NBER's announcements come late either when the economy is at the tail end of recession or right after recession. Does it means that the "recession" in the US is ending or at its tail end? Does it means that the "recession" has probably ended without the economy falling into technical recession? I really doubt so.

Why is the announcement coming in early this time is interesting. Three simple deductions can be made from the early announcement. One thing for sure, I believe the NBER is very worried about the current state of economy and the numbers are worsening at a rapid rate that policy makers and public needs to be warned and be prepared. Secondly, the usual argument that the recession will be over or already over as soon as the announcement from NBER is officially out may no longer be valid. This is because based on the economic data that are coming out for the passed half a year or so, things are expected to get worse before stabilising. We are still not at the end of the tunnel yet. Thirdly, be prepared to wait longer this time for the recovery in the economy and the financial markets compared with other past recessions.

* Thailand's 2nd PM in 3 months Somchai is ousted by court today!

* Oil falls to USD47.36 barrel!

* Central Bank rates at a glance. NZ 6.5%, ECB 3.25%, US 1% and Jpn 0.3%.

* RBA cuts its interest rate by 100 basis point to 4.25% today.