Tuesday, November 25, 2008

GDP Shrinks .5%

From CNBC:

The economy took a tumble in the summer that was worse than first thought as American consumers throttled back their spending by the most in 28 years, further proof the country is almost certainly in the throes of a painful recession.


American consumers -- the lifeblood of the economy -- slashed spending in the third quarter at a 3.7 percent pace. That was deeper than the 3.1 percent cut initially reported and marked the biggest reduction since the second quarter of 1980, when the country was in the grip of recession.

Consumers are hunkering down amid job losses, tanking investment portfolios and sinking home values, which are making them nervous about spending.

The massive drop in consumer spending should raise eyebrows. Lots of them. Here is a graph of the percentage change from the previous quarter in consumer spending. It starts in the first quarter of 1980.

Click for a larger image

I didn't put the dates on the graph because it was too much information. But you will notice there are very few dips. The negative numbers occurred in:

1Q1980 - 2Q1980
2Q1981 - 4Q1981
2Q1990 - 1Q1991

These also correspond to recessions.