Each quarter, the Bureau of Economic Analysis (BEA) publishes three progressively more accurate estimates of the nation’s Gross Domestic Product (GDP): advance, preliminary and final.  In issuing its preliminary estimate for the final quarter (Q4) of 2008, BEA gave us better data, worse numbers.
 
Last month, in its advance estimate, BEA had the total output of goods and services produced in the United States contracting by 3.8%.
 
BEA now estimates that in 2008 Q4, the nation’s inflation-adjusted (real) GDP contracted at an annual rate of 6.2%.  By way of context: were the economy to continue to decline at Q4’s pace for 12 months, it would shrink by some $880 billion dollars – or $100 billion more than the recently enacted stimulus package.
 
The recession’s breadth was readily apparent, with activity receding in virtually every major segment of the economy.  In broad terms:  consumer spending was off by 4.3% and business investment dropped by 20.8%.  The only exception was the public sector (+1.6%), where a 6.7% rise in Federal spending offset a 1.4% decline in state and local activity.
 
Housing began 2009 with numbers that made 2008 look good.  Existing home sales fell to a record low according to the National Association of RealtorsÒ, while the sales of new homes fell to the lowest level since Census began keeping records in 1963.  Prices continued to slump, with the S&P/Case-ShillerÒ Index falling a record 18.5% year-on-year.  Nationally, housing prices are down 26.7% from their peak in 2006 Q2.
 
Is silence golden?  Amid the downbeat news, there are unheralded signs of increasing stability in global financial markets, with interbank rates back to levels not seen since the Lehman bankruptcy in September 2008.  And Bloomberg reports that corporate bond trading in the U.S. has risen to the highest levels in two years.  Small steps, perhaps, but positive nonetheless. 
  
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The statements, opinions, and conclusions contained herein are based solely upon the author’s own studies, research, and personal experience.  Neither J.H. Cohn LLP nor the author makes any representation or warranty as to the accuracy or completeness of this information.  J.H. Cohn LLP and the author expressly disclaim any liability for any loss or damage which may be incurred, of any kind whatsoever, as a result of or arising from the use of any of the information contained herein or reliance on the accuracy or completeness of it.

 

For more information, contact Patrick O’Keefe, director of economic research at J.H. Cohn, at pokeefe@jhcohn.com  or 973-364-7724.