Third Quarter Output Shrinks
by David on October 31st, 2008
The Commerce Department issued its initial and extremely preliminary estimate of third quarter Gross Domestic Product yesterday morning. (GDP is the total output of goods and services produced within a country’s borders.) US GDP dropped at an annual rate of 0.3% during the third quarter. It increased 0.8% on a year-over-year basis. Essentially all of the year-over-year growth can be attributed to the one-off stimulus of tax rebates distributed and (mostly) spent this past summer.
The components of 3rd quarter GDP provide little encouragement for a quick turnaround; in fact, they clearly point to harder times ahead. Personal consumption dropped 3.1%. This is the first outright decline in consumer spending since the fourth quarter of 1991. That’s “positively un-American,” as some office-seekers might say. The 14.1% drop in durable goods—that is, items meant to last at least three years—was the biggest since the first quarter of 1987. But that’s nothing. The 6.4% decline in non-durable goods consumption was the sharpest since the fourth quarter of 1950. Investment in residential structures continued its steep double-digit downward trajectory. The $350 billion (annualized) spent last quarter compares to a peak of $602 billion (annualized) in the fourth quarter of 2005. Investment in business equipment and software accelerated its decline with a 5.5% drop following a 5.0% drop in the 2nd quarter.
Nor did the glow from the few bright spots provide much comfort. Spending on non-residential structures has been robust, and it continued to grow though at a slackening pace. The 7.9% rise was the smallest in almost two years. Exports increased as well, but the strengthening dollar—not to mention global recession—is already creating a slowdown. State and local government spending rose 1.4%, though here again it’s hard to imagine that falling tax revenues won’t force spending cuts soon. Finally, the biggest jump was spending on national defense, up 18.1%. Let’s hope this is one positive economic trend that will not continue.
Tags: community development, economic predictors, financial crisis, green banking, ShoreBank, triple bottom line
