U.S. Gross Domestic Product
U.S. First Quarter GDP Declines 6.1 Percent, Consumer Spending Rises 2.2 Percent
April 29, 2009
CreditPulse photo
The U.S. economy has shrunk
in four of the past six quarters.
The United States gross domestic product (GDP) declined for the third straight quarter for the first time since 1974-75. U.S. GDP has declined 12.9 percent since the third quarter of 2008.
Real gross domestic product decreased at an annual rate of 6.1 percent in the first quarter of 2009, according to the advance estimate released earlier today by the U.S. Commerce Department. GDP is the measure of all goods and services produced by labor and property located in the United States. GDP declined 6.3 percent in the fourth quarter of last year.
Negative numbers in exports (-4.06%), private inventory investment (-2.79), equipment and software (-2.55), nonresidential structures (-2.13) and residential fixed investment (-1.36) were the main contributors. The second straight quarterly decline of at least 6 percent shows that the U.S. economy is still in recession.
Exports, led by manufactured goods, decreased by 4.06 percent, an 18 percent increase from the fourth quarter 2008 decrease of 3.44 percent. Business inventories decreased by 2.79 percent, a significant amount from the 0.11 percent decrease from the previous quarter. Private businesses trimmed inventories $103.7 billion in the first quarter, following decreases of $25.8 billion in the fourth quarter, according to the Commerce Department.
"This is nothing to celebrate, and simply indicates that the recession will be longer and deeper than most economists expect," said Peter Schiff with Euro Pacific Capital, as reported in the WSJ Online. "With the collapse of the housing and stock markets, the surge in unemployment, and the fall in wages, the only way that consumers can spend more is if they reduce savings or increase borrowing. However, our economy collapsed precisely because we borrowed and spent too much to begin with. The economy will not find a solid foundation unless consumers decide to live within their means. Sadly that message is not getting out," added Schiff.
Not all the news was bad as consumer spending, which accounts for over two-thirds of U.S. economic activity, rose 2.2 precent after dramatic declines in the latter half of 2008. Consumer spending was boosted by a 9.4 percent jump in purchases of durable goods, the first advance after four quarters of decline.
Guy LeBas, an economist with Janney Montgomery Scott, says "the first-quarter consumer performance is likely a matter of a bounce from low late 2008 levels, and with a savings rate in the 4% range, significant consumption growth will remain a long run challenge for the domestic economy," as reported in the WSJ Online.
Currently, the United States gross domestic product stands at $14.08 trillion.
