Third GDP Estimate Shows 6.3% Decline in Q4

Washington, DC, March 26, 2009--The U.S. economy contracted at a 6.3% annualized seasonally adjusted rate in the fourth quarter of last year, the Commerce Department reported Thursday in its third estimate of quarterly growth.

The number was revised from 6.2%.

 It was the third largest decline in GDP in 50 years. Economists believe the current quarter, which ends March 31, was nearly as bad. Current projections look for GDP to fall at a 4.8% annual pace. Since 1947, GDP has never fallen by more than 4% for two quarters in a row.
 
GDP is expected to fall 1.9% in the second quarter.

The slump in the economy in the fourth quarter was broad based, with declines in every major sector except the federal government. Corporate profits fell at the fastest pace since 1953.

There were a few bright spots in the GDP report.

While the liquidation of inventories subtracted from growth in the fourth quarter, it should be a positive factor going forward because firms will have fewer overstocks to reduce before they can resume production.
 
Prices fell at the fastest pace on record, helping consumers' and businesses' purchasing power. The personal consumption expenditure price index fell a record 4.9% annualized, while core prices rose just 0.9%. Real disposable incomes increased at a 2.7% pace.

Residential investment fell 22.8% in the fourth quarter, the 12th consecutive decline in the sector where it all began.
Export growth had kept GDP positive during the first two quarters of the recession early last year, but exports fell 23.6% in the fourth quarter.