Investors may want to view the first quarter U.S. Gross Domestic Product report this way: the contraction was deep, but it was not as comprehensive as the plunge recorded in Q4 2008.

The nation's economy contracted 6.1 percent in Q1, due to a record decline in investment, the U.S. Commerce Department announced Wednesday. However, the contraction showed some signs of 'green shoots' that may point to a recession bottom up ahead.

Economist surveyed by Bloomberg News had expected Q1 GDP to decline 5.0 percent. The U.S. economy contracted 6.3 percent in the fourth quarter of 2008 and contracted 0.5 percent in the third quarter of 2008. In 2008, the world's largest economy grew a scant 1.1 percent -- well below capacity.

What's more, the Q4 2008 / Q1 2009 contraction is the worst two-quarter contraction in 60 years. Add the 0.5 decline in Q3 2008 and it's the first time the U.S. economy has contracted for three consecutive quarters since 1975. President Gerald Ford, R-Michigan, was the nation's chief executive then. In current dollars, U.S. GDP fell to an annualized rate of $14.01 trillion in Q1.

Over the last four quarters, the economy has contracted 2.6 percent – the largest contraction since 1982, during which the nation also incurred a pronounced recession.

Another tell-tale stat: business investment plunged 37.9 percent in Q1, as U.S. companies were reluctant to invest in plant machinery, business equipment and to launch new projects amid weak domestic and international demand conditions.

Some bright spots emerge

However, although large, the Q1 GDP contraction was not as broad, or 'as wide' as the Q4 2008 decline, and there were some bright spots.

For example, in Q1 consumer spending increased 1.5 percent, durable goods spending jumped 9.4 percent, non-durable goods spending rose 1.3 percent, services spending increased 1.5 percent, and real disposable income rose 6.2 percent. Also, the savings climbed 4.2 percent – the highest savings rate since 1998.

On the downside, in Q1 housing investment declined for the 13th consecutive month, plunging 28 percent.

Chris Rupkey, chief financial economist for the Bank of Tokyo-Mitsubishi UFJ Ltd., is in the camp that argues the U.S. economy is trying to put aggregate supply back in balance with demand.

"The economy is not out of the woods yet, but as inventory levels get brought down in line with sales, factory production may see a restart," Rupkey told Bloomberg News Wednesday.

Markus Schomer, global economic strategist at AIG Investments, agreed with Rupkey.

"We're still declining, but we can see the forces that will get us out of this," Schomer told The New York Times Wednesday. "We still have this massive fiscal stimulus coming. There are a lot of positives that are coming over the next six to 12 months that will drive the recovery."

Also in Q1, trade plummeted: exports fell 30 percent, the most in 40 years, and imports fell 34.1 percent, the category's biggest decline 34 years. The trade gap's narrowing added 2 percentage points to growth.

In addition, in Q1 the price index for domestic purchases dipped 1%. Consumer prices fell 1%, while core consumer prices, which excludes the often-volatile food and energy component, increased just 1.5%.

Economic Analysis: It's hard to put a positive 'spin' on a 6.1 percent GDP decline, but there were some green shoots in the Q1 report: inventories and production and being brought back in-line with demand – something that sets the stage for future production increases. Also, consumer spending showed some signs of life. Add the impact of fiscal stimulus working its way into the economy, and one can at least construct an argument for a bottoming of the recession in Q3 / Q4.

That said, investors should remain cautious: the U.S. job market must turn around to give the U.S. economy that major source of demand to increase both real median incomes and corporate earnings, and thus far, the job market has displayed few signs of turning around.

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