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Meanwhile, Economic Contraction Continues

Economy shrank by 6.1% in 1st Quarter:

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, reported by the Commerce Department on Wednesday, 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, which measures total goods and services output within U.S. borders, has now dropped for three straight quarters for the first time since 1974-1975.

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  • Display: Sort:
    There is a bit of a silver lining.. (5.00 / 3) (#2)
    by steviez314 on Wed Apr 29, 2009 at 10:49:34 AM EST
    Consumer spending held up, while it was inventory liquidation that was a big drag.

    This is better than to have no demand and overflowing store shelves.  If businesses see that consumer demand might hold up, they will begin inventory re-stocking again, and help future GDP.

    That's a good point (none / 0) (#3)
    by Big Tent Democrat on Wed Apr 29, 2009 at 10:50:36 AM EST
    That is indeed a significant silver lining.

    Parent
    I think that new sparkling opportunities (none / 0) (#4)
    by Militarytracy on Wed Apr 29, 2009 at 10:58:19 AM EST
    for small business will evolve because many large companies did a lot of not very smart things in recent years. There will still be a demand for many services that new small businesses will be able to fill.

    Parent
    Caution..... (none / 0) (#19)
    by NYShooter on Wed Apr 29, 2009 at 03:48:45 PM EST
    We all hope that your analysis (understandably cautious) proves correct, and that "consumer spending" continues, and grows. But, we know that one month's statistics are extremely unreliable for the purpose of determining trends, or future directions.

    For instance, how much of the "spending" was essential spending, temporally delayed by economic fears, and how much was a loosening of discretionary spending due to an uptick in consumer confidence?

    Most economists like to have a three month moving average before accepting the data as reliable.

    But, to your point, I'm reading the entrails too, looking for that "glimmer" that leads us out of this mess.


    Parent

    but the market's surging (none / 0) (#1)
    by Turkana on Wed Apr 29, 2009 at 10:46:19 AM EST
    what do you want- a functioning economy and jobs, or happy investors?

    The market is divorced from reality :) (5.00 / 3) (#5)
    by Militarytracy on Wed Apr 29, 2009 at 10:58:51 AM EST
    to too many (5.00 / 1) (#6)
    by Turkana on Wed Apr 29, 2009 at 11:11:30 AM EST
    it's the only "reality" that matters...

    Parent
    The market isn't "surging" (none / 0) (#7)
    by Slado on Wed Apr 29, 2009 at 11:31:22 AM EST
    Compared to just 6 months ago it is still way down.

    Sure it's bouncing up and down between the high 7000's and the low 8000's but nobody is getting rich in the market.

    The market is reflecting the reality that we are in for some tough economic times for the next few years.

    The economy is retrackting because we are in debt up to our eyeballs.  The economy is goign to retract for the next few years until we pay all of this debt off.

    Get used to it.

    Parent

    Well, the CNN talking business head (none / 0) (#8)
    by Militarytracy on Wed Apr 29, 2009 at 11:50:38 AM EST
    just said about a half an hour ago that the market was showing a broadbased rally.  Your reality and her reality......not the same :)

    Parent
    Rally to what? (none / 0) (#10)
    by Slado on Wed Apr 29, 2009 at 12:54:06 PM EST
    Are we going to get back to the 11,000 market that we had before the massive selloff starting last summer.

    I doubt it.

    Her rally is not a real rally because as long as the economy is slwoing the market can only go so high.  Maybe it will hit 9,000 this year but that's best case scenario and we've all still lost money.

    Then when inflation kicks in it won't matter.  The money you've got in the market will be more wothless thanks to the reckless spending by our gov't and the reckless printing of money by the fed.

    Parent

    The illuson continues (none / 0) (#9)
    by Dadler on Wed Apr 29, 2009 at 12:12:27 PM EST
    An economy based on blind consumerism, which ours still is, will never hold up long.  Our paradigms are rotted and it is time to invent a new game, use some American imagination to remake the economy into something the world hasn't seen before.

    But this is America, land of the free, home of the brave, we can't possibly be that innovative or think even an inch out of the box.

    Make full employment the first priority.  Short of that, we are going to have an economy that is still just a game with a few winners and a lot of losers, instead of a game in which everyone who participates honestly with effort is allowed to share in the spoils to an extent we have never allowed.

    We can have wealth through imagination, innovation, acheivement, inheritence, what have you, and STILL have a fully employed and more equitable and long-term stable society.  Apparently, however, the wealthy only seem to think they can exist in a rigged game.

    Peace.

    consumer spending (none / 0) (#12)
    by Jlvngstn on Wed Apr 29, 2009 at 02:52:41 PM EST
    went up because of tax refunds. I am guessing that will be corrected come June. That green shoot you are seeing is mold not broccoli.

    and gift card redemption (none / 0) (#13)
    by Jlvngstn on Wed Apr 29, 2009 at 03:14:56 PM EST
    played a role as well.


    Parent
    tax refunds (none / 0) (#14)
    by CST on Wed Apr 29, 2009 at 03:21:11 PM EST
    Would not have had an impact in the first quarter.

    Maybe the second quarter.  The first quarter ended in March.

    Parent

    lots of people file before (none / 0) (#15)
    by Jlvngstn on Wed Apr 29, 2009 at 03:27:34 PM EST
    april 15th and do so electronically.  If you do your taxes at an HR block and are owed, they will give you a check minus fees the day you file.

    Tax refunds had a significant impact on this quarter.  

    Parent

    a lot of people (none / 0) (#16)
    by CST on Wed Apr 29, 2009 at 03:38:16 PM EST
    also saved or paid off debts.  And not everyone got them that early.

    Not to mention, lower inventories at this point are a good thing, no matter how/why it happened.

    I get that things are still bad.  But I won't let you rob me of my silver lining! :)

    Parent

    yes (none / 0) (#18)
    by Jlvngstn on Wed Apr 29, 2009 at 03:42:57 PM EST
    you save some, you pay down credit cards and you spend some.

    Lower inventories is a good sign usually, but consumption will continue to decline until u/e bottoms out.  U/E is not bottoming out until the summer.

    Parent

    80 million people filed electronically in 2007 (none / 0) (#17)
    by Jlvngstn on Wed Apr 29, 2009 at 03:39:57 PM EST
    average payout time is 8-10 days, and again for an astronomically high fee you can get the check from the preparer if you sign over the right to the physical check to them.

    I have no idear what % of those are getting a refund but when times are tough and people are expecting a refund, they tend to file early and electronically.

    Parent

    fyi (none / 0) (#20)
    by Jlvngstn on Wed Apr 29, 2009 at 04:04:02 PM EST
    "Internal Revenue Service data show that through April 3, total individual refunds were up by about 15%, to $210 billion, from $183 billion at the same point last year. That extra money in consumers' pockets -- coupled with a drop in gasoline prices -- has helped keep consumer spending surprisingly healthy in recent weeks, economists say. "  courtesy of marketwatch....

    Parent
    validation (none / 0) (#22)
    by Jlvngstn on Thu Apr 30, 2009 at 09:49:20 AM EST
    "The big swing in spending "is easily explained by the massive one-time cash flow gains from the plunge in gas prices, the 5.8% cost of living adjustment to Social Security payments effective January and the 15% year-on-year rise in tax refunds," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. "

    seniors will be getting a 250 check in May and more tax refunds will be coming.  Come June, consumption will decrease dramatically.  We will tread water until October.  October will be fugly.

    Parent

    The last two years (none / 0) (#21)
    by Ga6thDem on Wed Apr 29, 2009 at 07:40:02 PM EST
    I've gotten back my tax refund in Feb and it's electronically deposited in my account with ten days of filing. You can bet your bippy that a lot of that spending was tax money. When I had to pay I filed on April 15th.

    Parent