Fourth Quarter GDP Figures Have Been Revised

To all those who have tried to suggest the economic problems of this country are not that bad (I'm looking at you Republicans) and that there were even signs of recovery at the end of Bush's administration, the news today is not good.

Highlighting that this nation is facing a major crisis, the fourth quarter GDP figures have been revised.

In Revision, G.D.P. Shrank at 6.2% Rate at the End of 2008, by Catherein Rampell, New York Times: The economy at the end of last year contracted at a far faster rate than initially estimated... With the exception of government spending, every major component of the economy shrank.

Output fell 6.2 percent at an annualized rate in the fourth quarter of 2008, revised downward from a previous estimate of a 3.8 percent decline.

The economy took the biggest hits in exports, retail sales, equipment and software, and residential fixed investment.

The downward revisions, though, came primarily because of a larger-than-anticipated contraction in inventories of unsold goods. ... Some hail the decline in inventories as potentially good news.

“The only plus to take out of this is that inventories weren’t as high, and that implies you don’t have to cut as much this quarter to get them back under control,” Mr. Gault said. He added that inventories were still too high, and he expected companies to further scale back their production, especially in response to the dismal consumer spending numbers.

Households also saved much more of their paychecks than initially estimated.

Professor Krugman comments in his blog

Minus 6.2%: Yikes.

And if the data on new unemployment claims are any indication (which they are), the economy is continuing to plunge at least as fast.

As Brad DeLong says, I think we’re going to need a bigger stimulus.

This will be a surprise for some, but it just confirms what most people thought was happening.