The weak performance reflected the increasingly thrifty inclinations of American consumers in the face of plummeting real estate prices, tightening credit and a deteriorating job market. Economic growth was also hampered by a continued pullback in construction and business investment.
The only factors preventing the economy from sliding backward were the growth of American exports — aided by a weakening dollar — and a buildup of inventories by businesses.
Gross Private domestic investment decreased 4.7%, with fixed investment (think real estate) dropping 9.7%. Residential turned in another dismal quarter with a drop of 26.7%. However, non-residential also dropped, coming in at -2.5%. This is the first decrease since the fourth quarter of 2006 and that figure was out of place as well. In other words, it's been a long time since nonresidential figures were negative.
Consumer spending increased 1%. Spending on durable goods decreased 6.1% and spending on non-durable goods decreased 1.3%. Services increased 3.4% -- a very high number in this series indicating we probably won't see growth in this area at this level for the next few quarters. This is an incredibly big issue going forward. Consumer spending accounts for 70% of US GDP. When the consumer stops spending, the US stops growing.
Exports increased 5.5% and imports decreased 2.5%. That's about the only good news here.
Short version -- this report stinks and points to serious trouble ahead. There's no good news here.
