Word: gdp
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...with their first estimate of how fast the economy shrank in the fourth quarter, economists and investors were surprised that it was at a mere 3.8% annual rate. Now, after some of the updates and revisions that are a standard part of the process of estimating gross domestic product (GDP), the number is a far more dramatic...
...Finally, the GDP number reflects the pitiful condition of the U.S. economy at the end of last year and the historical dimension of the current recession," wrote Harm Bandholz, U.S. economist at Unicredit Research, in a note to clients. (See TIME's "25 People to Blame for the Financial Collapse...
...since 1982, when the economy shrank at a 6.4% annual rate. And the BEA - which said new data on exports, consumer spending and inventories were the main causes of the dramatic change in its estimate - isn't done revising: there will be one last estimate of fourth-quarter GDP on March 26, then what are called benchmark revisions a couple of years down the road. The revision trend is clearly downward, and the 1982 mark is likely to be overtaken...
...After that, the two worst quarters for GDP growth since the BEA began keeping track of quarterly numbers in 1947 have been -7.8%, in the second quarter of 1980, and -10.4%, in the first quarter of 1958. But those were both temporary setbacks engineered by the Federal Reserve to crack down on inflation, and growth resumed soon afterward. All indications so far this year are that the downturn has continued and possibly worsened...
...economists do not expect shoppers to return to free-spending ways for years - or perhaps generations. Economist Stephen Roach, chairman of Morgan Stanley Asia, says that "there is good reason to believe the capitulation of the American consumer has only just begun." U.S. consumer spending as a percentage of GDP reached 72% in 2007, well above the pre-bubble norm of 67%. Using that as a gauge, Roach says that only 20% of the potential retrenchment of spending has taken place, even after the dramatic decline at the end of 2008. "The imbalance that contributed to the crisis - overconsumption...