Late last year my US recession probability indicator rose to 45%, suggesting the economy would come close to but just skirt a downturn (as defined by the National Bureau of Economic Research).

Since then the credit crisis has intensified and soaring commodity prices have taken a further chunk out of real incomes. Most forecasters believe a recession has started and some expect it to be deep. Yet the data still leave room for debate.

Available evidence suggests GDP may eke out a small gain in the first quarter. Based on February numbers released today, personal consumption should be flat at worst. Housing investment will again be a significant drag but should be neutralised by stronger net exports. Other capex is likely to be little changed and stockbuilding should be positive. Annualised growth of 1% or so does not look out of the question.

A key reason for thinking a recession has started is a fall in private payrolls over the last three months. A further decline in March numbers released next Friday would be difficult to ignore but a rebound should not be ruled out. Weekly unemployment claims have yet to cross the 400,000 level to be expected in a serious labour market decline, while the excellent Trim Tabs point out that withheld tax receipts have picked up in recent weeks, suggesting conditions have at least stopped deteriorating.

Remember that fiscal policy is set to be a significant positive for the economy from May, when tax rebate cheques start to be mailed out.