29 Apr 2009

GDP Down 6.1% in 1st Quarter

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Here’s a depressing article…Some excerpts:

The U.S. economy contracted at a surprisingly sharp 6.1 percent rate in the first quarter as exports and business inventories plummeted.

The drop in gross domestic product…was much steeper than the 4.9 percent annual rate expected by economists and followed a 6.3 percent decline in the fourth quarter.

GDP…has now dropped for three straight quarters for the first time since 1974-1975.

The Fed, which has cut interest rates to almost zero and pumped about a trillion dollars into the economy to try and break its downward spiral, is expected to leave policy unchanged at the meeting.

The advance report from the Commerce Department showed business inventories plunged by a record $103.7 billion in the first quarter, as firms worked to reduce stocks of unsold goods in their warehouses.

Exports collapsed 30 percent, the biggest decline since 1969, after dropping 23.6 percent in the fourth quarter. The decline in exports knocked off a record 4.06 percentage points from GDP.

Investment by businesses tumbled a record 37.9 percent in the first quarter, while residential investment dived 38 percent, the biggest decline since the second quarter of 1980.

The Commerce Department said the government’s $787 billion rescue package of spending and tax cuts…had little impact on first-quarter GDP.

A separate report showed U.S. home loan applications fell last week to the lowest level since mid-March, even as mortgage rates clung to record lows.

I’m sure that medieval physicians had conversations like this too.

“How’s the patient doing?”

“Not well. He’s even weaker than when his wife brought him in. In fact, I’ve never seen someone this sick.”

“Hmmm. You’ve tried bleeding him, right?”

“Of course, that was the first thing we did. In fact, I’ve taken more blood out of this guy than any of my previous patients, but this is the toughest disease I’ve ever seen. He’s not responding to unprecedented treatment.”

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