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2008 GDP

The Financial Crisis Bludgeons the Economy

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stock-trader-2008.jpg

A trader works on the floor of the New York Stock Exchange near the end of the days trading November 12, 2008 in New York City. The Dow dropped more than 400 points after Treasury Secretary Henry Paulson announced changes to the financial rescue package.

Photo by Mario Tama/Getty Images

In 2008, the recession hit with a vengeance. There were three quarters where the economy contracted. The subprime mortgage crisis of 2006 and the banking liquidity crisis of 2007 had finally spread to the general economy and the stock market.

Here's the blog posts for each GDP release in 2008. (Go to Current GDP Statistics for an explanation of the difference between advance, secondary and third GDP reports.) You will also note that these estimates have been revised substantially by the BEA each year, based on additional data. The current estimate is first, and each prior year's estimate follows in parentheses. This is pretty much the only record I've seen of all these revisions.

Take a look at Q3, and you'll see the recession was much, much worse than we knew at the time. The BEA revised estimate shows the economy contracted 8.3%, much worse than the 5.4% contraction originally proposed. It is also worse than any quarterly contraction in any recession since The Great Depression. (See History of Recessions for more.)

2008: -.03% (-.3% in 2011 revision, 0% in 2010, .4% in 2009)

Q1: -2.7% (-1.8% in 2011 revision, -.7% in 2010, No prior revision)

  • Advance Report: - Growth was only .6%, 
  • Second Report - Growth was revised up to .9%. Why it still felt like a recession, even though it technically wasn't.
  • Third Report - Growth was revised up to 1% thanks to exports.

Q2: 2.0% (1.3% in 2011 revision, 0.6% in 2010, 1.5% in 2009)

  • Advance Report: - The economy grew 1.9%. Revisions for 2007 were also released: 2007 GDP grew 2% and Q4 GDP fell .2%.
  • Second Report - Growth for Q2 2008 was revised up to 3.3%, thanks to new data about increased exports and decreased imports.
  • Third Report - Released when the economy was in the grips of a credit crunch, the BEA's downward revision only fueled further pessimism.

Q3: -2.0% (-3.7% in 2011 revision, -4% in 2010, -2.7% in 2009)

  • Advance Report - Growth was down .3%, the second time in a year. It was due to a 3.1% decline in consumer spending, the first decline since 1991 and the biggest drop since 1980. This was driven by a 6.4% decline in purchases of clothing and food, the biggest since 1950. 
  • Second Report - Growth slowed .5%, slightly more than the advance estimate of .3%.
  • Third Report: - The economy declined .5% in Q3. 

Q4:-8.3% ( -8.9% in 2011 revision, -6.8% in 2010, -5.4% in 2009)

  • Advance Report: - Growth was down 3.8%, the worst since the 1982 recessionThe bailout spending was only enough to keep the economy from collapsing further.
  • Second Report: - GDP was revised down to -6.1%.
  • Final Report: - GDP was revised further down to -6.3%, the worst since Q1 1982, when GDP fell 6.4%. A strong dollar coupled with the global recession cut exports, while the recession in the U.S. caused domestic demand to slump. Economic growth for all of 2008 was an anemic 1.1%. 

More GDP by Year

For earlier years, see U.S. GDP History

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