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Economic Free-Fall Runs Through First Quarter04-13-09 | News

Economic Free-Fall Runs Through First Quarter

Consumer spending, which now accounts for 71 percent of the total, contracted at a 4.3 percent annual rate in the fourth quarter and registered a negative growth contribution of -3.0 percentage points ?EUR??,,????'??+ a large drag from this part of the economy, according to NAHB. Consumer spending rarely goes negative. ?EUR??,,????'??? Courtesy of www.bloomberg.com

The contraction in real gross domestic product (GDP) for the fourth quarter of 2008 now stands at an annualized rate of -6.3 percent, according to the final estimate released by the Commerce Department on March 26. National Association of Homebuilders stated this represents a major downshift of 0.5% from the third quarter and is the sharpest decline since the depths of the 1982 recession.

The housing production component of GDP (residential fixed investment) contracted at a 22.8 percent annual rate in the fourth quarter. It knocked 0.8 of a percentage point from the overall GDP growth rate ?EUR??,,????'??+ quite a negative contribution from a component that now accounts for less than 3 percent of total GDP.

Consumer spending apparently stopped falling in the early part of this year, but serious weakness in other sectors of the economy figures to keep GDP in free-fall during the first quarter. NAHB estimates -5.2 percent.

Residential fixed investment should contract at nearly a 40 percent pace. Look for a major downshift in nonresidential fixed investment ?EUR??,,????'??+ structures as well as capital equipment and software ?EUR??,,????'??+ and NAHB expects businesses to cut inventory positions considerably.

Spending by state and local governments also should lose a good bit of ground in the first quarter. – Courtesy of NAHB