Panicky Wall Street may have already accepted that the economy is in recession but the economic data has yet to confirm that gloomy assessment.
If the U.S. economy can survive the next couple of months with no fresh shocks, it may avoid the bruising two-year downturn that some are predicting, though it may still feel a lot like a recession as employment and spending stall.
Thursday's report on business activity from the Philadelphia Federal Reserve Bank was the latest indication that the U.S. economy was slowing but not yet collapsing.
Should that trend continue through the second quarter, there is a chance that the economy could skirt the traditional definition of recession -- two quarters of negative readings on gross domestic product.
That just might buy enough time for Federal Reserve interest rate cuts and a $152 billion 2008 fiscal stimulus plan to take hold. It certainly would not be strong growth, but it may not be as grim as many investors now fear.
Analysts from firms including Merrill Lynch, Goldman Sachs and JP Morgan have concluded that the U.S. economy has likely slipped into recession. For many, the nail in the coffin was an unexpected steep drop in employment in February.
It may end up being largely a matter of semantics.
Nobody can say for sure whether the outcome is going to be just north or south of zero, and the point is also that it doesn't matter -- this is going to feel bad anyway, said Jorgen Elmeskov, chief economist at the Organization for Economic Cooperation and Development.
The Philadelphia Fed's business activity index stood at minus 17.4 in March, showing contraction in the region's manufacturing sector. Still, it was not as grim as February's minus 24, nor as bad as economists had predicted.
The key message from this survey is that things are quite bad, but that sentiment has, so far, weakened further than hard activity, said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York. Manufacturing growth is slow, but the sector is not in meltdown.
In another somewhat promising sign, manufacturers' view of business conditions six months from now was not as dire as it was in February. The index stood at minus 0.5, up from minus 16.9. New orders climbed to a positive 8.5 from a minus 7.8.
TAKE A DEEP BREATH
There is no question that much of the economic data has followed a worrisome pattern. Not only is manufacturing slowing, but the services sector has looked weak, companies are cutting jobs, and the housing market keeps deteriorating.
All this has contributed to a collapse in consumer sentiment as well. A report from the U.S. Conference Board last month said its index of consumer sentiment fell to its weakest in five years in February.
And it is hard to ignore the latest drop in the Economic Cycle Research Institute's weekly leading index, which the group said was unambiguously in recessionary territory.
However, investor sentiment seems to have fallen faster than the real economy.
Everyone should take a deep breath, Princeton University economist Alan Blinder wrote in a recent editorial in the Washington Post.
Yes, the economy is limping, but it's not collapsing. And the effects of the Fed's interest rate cuts and the stimulus package that Congress enacted last month are still to come.
The latest Blue Chip economic forecast shows that economists expected a paltry 0.1 percent annual growth rate in the first quarter, and 0.5 percent in the second quarter. Their confidence in those figures was thin. Roughly 40 percent of the economists polled in the survey expected a recession.
Indeed, the survey of economists likely understated the somber mood because it was conducted before a March 7 report showing the U.S. economy shed 63,000 jobs in February, the biggest decline in nearly five years.
There was further evidence of a weakening job market on Thursday, when the Labor Department reported that the number of workers filing initial claims for unemployment aid climbed 22,000 last week, while the overall number on the benefit rolls rose to a 3-1/2 year high a week earlier.
Today's figure should be taken with a grain of salt, however, as it could have been boosted by temporary auto-related layoffs stemming from the American Axle strike, which has led to about two dozen auto plant shutdowns at GM, noted Omair Sharif, a strategist at RBS Greenwich Capital in Greenwich, Connecticut.
Perhaps the best news of the day came from commodities markets, where investors briefly pushed oil below $100 per barrel for the first time in two weeks and sold pricey wheat, corn and other items. The Reuters-Jefferies CRB index .CRB of commodities was down nearly 2 percent and has shed more than 8 percent this week.
That should help ease inflation pressure on consumers who have been forced to spend a bigger portion of their budgets on food and fuel, and make life a bit more bearable for the increasingly inflation-wary U.S. Federal Reserve.