U.S. GDP Drops 5.5 Percent in First Quarter

Officials revise estimate downward as pace of decline slows

The U.S. real gross domestic product dropped at an annual rate of 5.5 percent in the first quarter of 2009, compared with the fourth quarter of 2008, according to a final estimate released by the Bureau of Economic Analysis.

 

In the fourth quarter of 2008, real GDP decreased 6.3 percent so the latest figures indicate that the pace of the decline may be slowing down. Last month, the Bureau released preliminary estimates, based on less complete data, that the decrease in real GDP was 5.7 percent during the first quarter of 2009.

 

The decline in real GDP reflected negative contributions from exports, equipment and software, private inventory investment, nonresidential structures, and residential fixed investment. The declines in these areas more than compensated for growth in personal consumption expenditures. Current-dollar GDP -- the market value of the nation's output of goods and services - decreased by 2.9 percent, or $103.1 billion, in the first quarter to a level of $14.097 trillion. In the fourth quarter, current-dollar GDP decreased 5.8 percent, or by $212.5 billion.

 

Both exports and imports deteriorated at a faster pace. Real exports of goods and services decreased 30.6 percent in the first quarter, compared with a decrease of 23.6 percent in the fourth. Real imports of goods and services decreased 36.4 percent, compared with a decrease of 17.5 percent. Private businesses inventories declined $87.1 billion in the first quarter, far exceeding a decrease of $25.8 billion in the fourth quarter of 2008.

 

Real non-residential fixed investment also deteriorated, dropping 37.3 percent in the first quarter of 2009, compared with a decrease of 21.7 percent in the previous quarter. Nonresidential structures decreased 42.9 percent, compared with a decrease of 9.4 percent. Equipment and software decreased 33.7 percent, compared with a decrease of 28.1 percent. Real residential fixed investment decreased 38.8 percent, compared with a decrease of 22.8 percent.

 

On the positive side, although the numbers are not final, profits from current production increased $48.1 billion in the first quarter, after dropping $250.3 billion in the fourth quarter. Current-production cash flow increased $60.4 billion in the first quarter, compared with a decrease of $97.0 billion in the fourth quarter. Also positive, real personal consumption expenditures increased 1.4 percent in the first quarter, after dropping 4.3 percent in the last quarter of 2008.

 

Deflation moderated. The price index for gross domestic purchases decreased 1.0 percent in the first quarter after dropping 3.9 percent in the fourth quarter of 2008. Excluding food and energy prices, the price index for gross domestic purchases increased 1.4 percent in the first quarter

 

 

(Source: Journal of Commerce)