Today’s GDP report highlighted a downwardly-revised 6.2% decline, after an initial estimate of -3.8% just one month ago. That’s a staggering decline – the steepest since 1982, right smack in the middle of the double dip recessions of the Reagan era. Economists were expecting a decline of 5.5%.
Sharp drops in consumer spending, business investment, and exports had much to do with the renewed decline, as the financial crisis took its tool on consumers and corporations alike. Consumer spending fell at a 4.3% pace, the worst since 1980, and subtracted 3 percentage points from growth in the quarter. Business investment dropped 21.1%, the worst since the 1975 recession. Investment (or lack there of) subtracted 2.5 percentage points from growth. Exports fell 23.6% in the fourth quarter, the most since 1971, and subtracted 3.4 percentage points from GDP. The decline in imports did add 3 percentage points, though.
A Silver Lining? Ummm….Kinda???…
Even with everything we’ve been though lately, GDP actually increased 1.1% for all of 2008, despite the economy being in a recession for the entire year.
Growth was boosted 1.4 percentage points by the improvement in the trade balance. Government spending contributed 0.6 of a percentage point to growth, with consumer spending and business investments each adding 0.2 of a point. – MarketWatch
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