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The BEA reported that the advance U.S. GDP growth for Q4 2007 plummeted to .6% from an 4.9% in Q3, and 3.9% in Q2. The total GDP for the year was 2.2%, down from the 2006 growth rate of 2.9%. The decline in growth was due to the housing market slowdown and related weak consumer spending. (Source: GDP News Release)

Coincidentally, it is the exact same number as GDP growth in Q1 2007. The last time GDP was that low was in Q1 2003, the tail-end of the last recession. A healthy growth rate is about 2-3%. For a review of the most recent GDP reports, see GDP Current Statistics.

A decline in Q4 GDP was expected by most economists, including Federal Reserve Chairman Ben Bernanke. (See National and Regional Overview, Charlotte, NC, 11/29/07)

What It Means to You

Unlike Q3, exports were not helped by the dollar's decline, which helps exports (by making them relatively cheaper and more competitive) and hurts imports (by making them more expensive). That's because higher prices of imports like oil more than offset the higher exports in dollar amounts.

The greatest concern now is whether GDP will worsen or turn negative in Q1 2008. If so, a recession could ensue if Q2 GDP also turns negative. The only positive in the poor GDP report is that it will make policy-makers address the slow economy very soon.

To find out how to weather a possible recession, see How Would a Recession Affect Me?

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