GDP hit the skids with biggest decline since 1982

No improvement in U.S. GDP in Q4 2008, as it plummeted at a -6.2% annual rate, with large declines in consumer spending, investment, and exports, the U.S. Commerce Department announced Friday.

It's the U.S. economy lowest GDP rate since the -6.4% plunge in Q1 1982 -- another era that saw a sever recession, the Reagan Recession. A Bloomberg News survey had expected Q4 2008 GDP to decline -5.4%. The U.S. economy grew a scant 1.1% for all of 2008 -- or well below capacity.



Investment, export declines weigh

The U.S. Government characterized business investment, -21.1%, and exports, -23.6%, as "substantially weaker" in Q4 2008. Consumer spending fell -4.3% in the quarter. In current dollars, U.S. GDP fell to a $14.2 trillion annualized rate in Q4 2008. Further, if GDP falls by more than 4.0% in Q1, it would the first back-to-back -4% declines in GDP since 1947.

Economic Analysis: With the poor Q4 GDP performance, investors should expect the recession, which began in December 2007, to continue at least the end of Q3, and most likely to the end of 2009. The reason? Consumer spending, which accounts for 60-65% of the U.S. economy, shows little sign of rebounding. Hence, look for continued, sizable lay-offs, and downward revisions to quarterly and full-year revenue and earnings estimates for most large corporations -- all negatives for the U.S. stock market through at least the end of Q2.