“All of this points towards real GDP declining faster in the first quarter than the fourth quarter,” Levy said. Another bad portent was a sharp decline in exports. U.S. sales to other countries had been strong in recent years, boosted by high demand overseas and the relatively low value of the dollar. But that situation reversed sharply in the last three months of 2008, with exports plummeting 19.7%.
According to the International Monetary Fund, the decline in the U.S. is matched by other leading economies, which contracted about 5.5% in the fourth quarter of 2008.
The decline was a bit less than anticipated but obviously shows an economy in serious trouble. U.S. GDP Falls At 3.8 Percent Pace In 4th Quarter
The Commerce report showed consumer spending – which accounts for a whopping two-thirds of U.S. economic activity – fell another 3.5 percent in the fourth quarter after declining 3.8 percent in the third quarter. Spending on durable goods such as cars and furniture plunged 22.4 percent, the steepest decline since the first quarter of 1987.
As I have been saying for awhile the economy is in trouble and 2009 looks to be difficult. We should be happy if a recovery is underway in the 4th quarter of 2009 and we have not too drastically increased the burden on the future to pay for current spending.
Related: Financial Market Meltdown (Oct 2008) – Cracks in US Economy? (Dec 2006) – Fed Continues Wall Street Welfare – Forecasting Oil Prices – Crisis May Push USA Federal Deficit to Above $1 Trillion for 2009