The BEA advance report warned that the U.S. GDP growth rate for Q1 2009 fell 6.1%. The was the third declining quarter in a row, and the fourth since the recession began in Q4 2007. The slowdown in Q1 was only slightly less than the 6.3% drop in Q4 2008. This is the first time since the Great Depression that GDP fell more than 5% for two quarters in a row. The silver lining is that a large contributor to the decline was a decrease of business inventories. This means that inventories are getting lean, potentially boosting production next quarter if orders hold steady. (Source: GDP News Release)
What It Means to You
The decrease of business inventory contributed 2.79 points to the Q1 decline and .11 in Q4. When inventories are taken out of the calculations, Q1 GDP fell 3.4% compared to 6.2% in Q4 2008. However, the near-bankruptcy of the U.S. auto industry contributed 1.36 percentage points to the Q1 decline and 2.01 points to the Q4 2008 decline. Another contributor was the fall-off in commercial construction.
Since unemployment is a lagging indicator, expect it to increase for at least the rest of this year. However, the economy could start to actually improve before then, although it won't feel like it. Keep an eye on the April Durable Goods Report for any signs of improvement. For a review of the most recent GDP reports, see GDP Current Statistics.
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