Thursday, June 25, 2009

GDP Decreases 5.5%

From the BEA:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 5.5 percent in the first quarter of 2009, (that is, from the fourth quarter to the first quarter), according to final estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP decreased 6.3 percent.


The good news is this number keeps going higher and (or less worse).

But there are still major problems, especially in the area of investment. Consider these points from the report:

Real nonresidential fixed investment decreased 37.3 percent, compared with a decrease of 21.7 percent. Nonresidential structures decreased 42.9 percent, compared with a decrease of 9.4 percent. Equipment and software decreased 33.7 percent, compared with a decrease of 28.1 percent. Real residential fixed investment decreased 38.8 percent, compared with a decrease of 22.8 percent.


Investment fell out of bed last quarter in a big way. Residential has been terrible for a few years now, so that number is not shocking. However, business essentially halted any expansion plans last quarter. That's very concerning. In addition, consider this chart which shows the percentage of non-residential investment as a percentage of GDP. All figures are inflation adjusted.



The median value for that chart is 10.60% -- which is right about where we are currently after the drop-off.