Wikinvest Wire

GDP contracts at 6.2 percent pace

Friday, February 27, 2009

In the second of three readings on economic growth during the fourth quarter, the Commerce Department reported the U.S. economy shrank at an annualized rate of 6.2 percent, the sharpest contraction since the first quarter of 1982.
IMAGE The consensus forecast had the "advance" estimate of a 3.8 percent rate of decline, released last month, being revised to minus 5.4 percent. The downward revision of 2.4 percentage points was far larger than normal and the "final" estimate for the fourth quarter will be released at the end of March.

For all of 2008, the economy expanded 1.1 percent, the curve in the chart above indicating negative growth last year being a simple moving average of changes over the preceding four quarters.

Consumer spending tumbled at an annual rate of 4.3 percent during the fourth quarter after declining at a rate of 3.8 percent during the third quarter. This marks the first time this important component, accounting for roughly 70 percent of all economic activity, has posted back-to-back declines of more than three percent since detailed record-keeping began 61 years ago.

As shown below, slowdowns in consumer spending and business investment contributed about equally to the overall decline during the fourth quarter.
IMAGE Government spending was the sole positive component last quarter, making a 0.32 percentage point contribution to the overall total and, for the first time in almost two years, net exports turned negative, driven lower by the strengthening U.S. dollar and providing more evidence of a rapidly slowing global economy.

Rising exports had been a major driver of U.S. economic growth over the last two years. Stripping out the contribution of net exports to the headline growth rates would see an average positive rate of about one percent turn into a negative number of about the same magnitude.


Ted S. said...

Tim, as you would say, YOUSA!
"Deutsche Bank AG chief U.S. economist Joseph LaVorgna said it’s “conceivable” the economy will shrink as much as 10 percent in the first quarter."
I just realized that you could interpret YOUSA as YO! USA! Is that what you really mean??

Tim said...

No, not until now - that's funny...

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