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First-Quarter GDP Hammered by Temporary Collapse of Business Spending05-26-09 | News

First-Quarter GDP Hammered by Temporary Collapse of Business Spending

A virtual collapse of business spending was the major factor behind the sharp decline in GDP for the first quarter. Spending on capital equipment and software contracted at a 34 percent annual rate, nonresidential construction fell at a 44 percent rate and residential investment plunged at a 38 percent rate. ?EUR??,,????'??? Courtesy of www.cbcconsulting.com/services.htm

Real gross domestic product contracted at an annual rate of 6.1 percent in the first quarter of this year, according to the advance estimate released by the Commerce Department on April 29. This was a deeper decline than the prevailing consensus estimate ?EUR??,,????'??+ National Association of Home Builders expected a 5.2 percent contraction ?EUR??,,????'??+ and was nearly as deep as the 6.3 percent decline in the final quarter of 2008.

Indeed, this two-quarter contraction represents one of the worst performances in the entire post-war period. While the overall GDP growth rates were quite similar for the past two quarters, the composition of economic activity was quite different.

A major reduction in consumer spending was a huge negative in the fourth quarter of last year, subtracting 3 percentage points from GDP growth, but this component swung into the black in the first quarter of this year and delivered a solid positive growth contribution of 1.5 percentage points. ?EUR??,,????'??? Courtesy of NAHB