GDP Down 3.8% for Fourth Quarter
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 3.8 percent in the fourth quarter of 2008, (that is, from the third quarter to the fourth quarter), according to advance estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP decreased 0.5 percent.
The Bureau emphasized that the fourth-quarter “advance” estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4). The fourth-quarter “preliminary” estimates, based on more comprehensive data, will be released on February 27,
The decrease in real GDP in the fourth quarter primarily reflected negative contributions from exports, personal consumption expenditures, equipment and software, and residential fixed investment that were partly offset by positive contributions from private inventory investment and federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased.
Most of the major components contributed to the much larger decrease in real GDP in the fourth quarter than in the third. The largest contributors were a downturn in exports and a much larger decrease in equipment and software. The most notable offset was a much larger decrease in imports.
Final sales of computers subtracted less than 0.01 percentage point from the change in real GDP after subtracting 0.01 percentage point from the third-quarter change. Motor vehicle output subtracted 2.04 percentage points from the fourth-quarter change in real GDP after contributing 0.16 percentage point to the third-quarter change.
Update: One thing about recessions, and just in general, is that people often times tend to focus on the most recent data and ignore past data. This often leads people to arriving at conclusions where consideration of a larger “set” of information would probably preclude. In this case, it may be tempting to look at that -3.8% decline in GDP and think the world is ending. That soon things will be really bad. Some historical data to take into consideration:
- 1980 Second Quarter: GDP declined 7.8%
- 1981 Fourth Quarter: GDP declined 4.9%
- 1982 First Quarter: GDP declined 6.4%.
Now this doesn’t mean we shouldn’t be concerned or that things are going to be all milk and honey. This is shaping up to be a bad recession. We are already past the average lenght of a recession in the post WWII era. Just keep in mind that a decline like this, while not good, isn’t as bad as we’ve seen in the last 60 years or so.