The Joint Economic Committee notes:
GDP Growth Revised to -6.2% Annualized Rate for the 4th Quarter
The Bureau of Economic Analysis (BEA) released its “preliminary” estimate of -6.2% annualized growth in the inflation-adjusted (“real”) gross domestic product (GDP) for the 4th quarter. This was a downward revision from an earlier “advance” estimate of -3.8%. Real GDP declined at a 0.5% rate in the 3rd quarter of last year.
Highlights of today’s GDP report:
- The revision to GDP growth primarily reflected substantially weaker inventory investment and exports relative to the earlier estimate.
- The decline in real GDP in the 4th quarter primarily reflected negative contributions from exports (down 23.6% at an annualized rate), consumer spending (down 4.3%), business equipment and software investment (down 28.8%), and residential investment (down 22.2%).
- Residential investment has declined for 12 consecutive quarters, reducing real GDP growth over that period by an average of 0.90 percentage point.
- Over that same period, export growth has added to real GDP growth by an average of 0.63 percentage point.
- However, exports pulled growth down in the 4th quarter by 3.44 percentage points, after having added to growth in each prior quarter beginning in the 2nd quarter of 2003.
- The 6.2% annualized rate of decline in GDP in the 4th quarter was the steepest drop since the 1st quarter of 1982 (when GDP declined at a 6.4% rate).
Bob Stein of First Trust Advisors tells The Corner:
Real GDP growth was revised down substantially for the fourth quarter of 2008, which was the worst quarter for economic growth since early 1982. However, roughly half of the downward revision was due to slower inventory accumulation than previously estimated. Given the rapid decline in consumption in the second half of 2008, businesses will be cutting inventories aggressively in the first the first half of 2009. Today’s news suggests this task will be slightly easier than previously assumed. Although consumption fell at a 4.3% annual rate in Q4, we believe this rate of decline is unsustainable. Food consumption fell at an astounding 14.7% in Q4, the most on record. Autos are selling so slowly that it would take 25 years to replace the cars and light trucks already on the road. In other news this morning, the Chicago Purchasing Managers index, a measure of manufacturing in the Chicago region, increased to 34.2 in February from 33.3 in January. The consensus had expected a decline to 33.0.