Wikinvest Wire

Fourth quarted GDP unchanged at 0.6 percent

Thursday, February 28, 2008

In the second of three readings for fourth quarter economic growth, the Commerce Department reported no change from the initial estimate of a 0.6 percent annualized rate.
The final reading for the fourth quarter will be released at the end of March and the important first look at economic activity in the first quarter of 2008 will be released at the end of April.

In the most recent data, there was a modest upward revision to net exports and a small downward revision to consumer spending.

Going all the way back to the last recession earlier in the decade, the chart below shows the contribution from each of the four main components of real GDP growth.
This time around, the plunge in private domestic investment is due to declining residential construction whereas, in 2001, rapidly falling equipment and software purchases drove this important measure into negative territory.

Personal consumption, which accounts for more than 70 percent of economic activity (yes, it's a bad thing that this number is so high and it is entirely unsustainable), has only contributed about one percent to real GDP growth in two of the last three quarters.

The U.S. government will attempt to boost consumption with the tax rebates that should arrive in the second quarter, but first quarter economic growth will likely be driven lower by decreased levels of consumer spending.

It is widely believed that the economy has already entered a recession.

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