Recession Worse Than Prior Estimates, Revisions Show
July 31st, 2009Can we get some green shoots in here? What’s that? Tim and Ben said to charge em? Oh ok!
Via: Bloomberg:
The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed.
The world’s largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books, the Commerce Department said today in Washington.
“The current downturn beginning in 2008 is more pronounced,” Steven Landefeld, director of the Commerce Department’s Bureau of Economic Analysis, said in a press briefing this week. The revisions were in line with past experience in which initial figures tended to underestimate the severity of contractions during their early stages, he said.
The updated statistics also showed that Americans earned more over the last 10 years and socked away a larger share of that cash in savings. The report signals the process of repairing tattered balance sheets following the biggest drop in household wealth on record may be further along than anticipated.
Spending Slumps
Consumer spending, which accounts for 70 percent of the economy, decreased 1.8 percent in last year’s fourth quarter from the same period in 2007, exceeding the prior estimate of a 1.5 percent drop. Purchases also began sinking sooner than previously projected, registering their first decline at the start of 2008 rather than in the second half.
Treasuries headed higher after the report, while stock- index futures declined. Benchmark 10-year note yields were at 3.58 percent at 8:51 a.m. in New York, from 3.61 percent late yesterday. Contracts on the Standard & Poor’s 500 Stock Index were down 0.3 percent at 979.
Residential construction fell 21 percent during the period, almost 2 percentage points more than previously reported, aggravating what was already the worst slump since the Great Depression.
The Commerce Department also reported today that the economy contracted at a 1 percent annual rate from April through June after shrinking at a 6.4 percent pace in the first quarter, the most since 1982. The decline in the first three months of the year was previously reported as 5.5 percent.
