GDP Numbers: Some Perspective

Not trying to put a happy face on the economic numbers today but some historical perspective is useful. I did some prowling around and came up with this.

From Econobrowser:

On the other hand, today’s number does not mean that the real value of goods and services produced in the U.S. fell by 3.8% in the fourth quarter. The American convention is to report these numbers as annual rates, so that the actual drop within the quarter was only 1/4 the headline number. In fact, the level of U.S. real GDP in the fourth quarter of 2008 was only 0.2% lower than it had been in 2007:Q3, before the current recession began.

Level of U.S. real GDP in billions of 2000 dollars, 2007:Q1 through 2008:Q4.

Although the cumulative decline so far has been relatively modest, the 2008:Q4 quarterly drop is bigger than anything seen in the previous two recessions, and puts it among the dozen worst quarters on record since World War II.

Quarterly growth of U.S. real GDP (quoted at an annual rate), 1947:Q2 through 2008:Q4, with NBER-assigned recession dates indicated as shaded regions.


And from Woodward and Hall:

Excess over trend (billions of dollars)
Consumer durables -181
Consumer non-durables and services -273
Residential construction -371
Plant and equipment -68
Inventories -52
Imports 277
Exports 182
Government -7
Real GDP (sum) -493

The collapse of residential construction and of consumption is still the main negative effect visible in the breakdown of real GDP.  A decline in plant and equipment investment, all in the fourth quarter, is a new negative factor, as is the decline in inventory investment from its normal level. On the other hand, both parts of international trade are still remarkably favorable–over the course of the recession, imports have fallen $277 billion relative to trend, relieving the negative effect that high imports had in the past. And exports are $182 billion above trend. Real GDP is now almost half a trillion dollars below trend.

The consensus among forecasters is that real GDP will decline by about 1.5 percent to a trough in the middle of this year (3 percent annual decline on average over the first and second quarters), which would place GDP about $900 billion below trend.

So there you are. Make of all of this whatever you choose. At least when someone starts talking about the worst ever at the Superbowl party this weekend you will have some data to fire back with.

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