Econoday Economic Report: GDP March 26, 2009

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GDP

Released On 3/26/2009 8:30:00 AM For Q4f, 2008

	Prior	Consensus	Consensus Range	Actual
Real GDP - Q/Q change - SAAR	-6.2 %	-6.6 %	-6.9 % to -6.2 %	-6.3 %
GDP price index - Q/Q change - SAAR	0.5 %	0.5 %	0.5 % to 0.5 %	0.5 %

Highlights
The Commerce Department today announced its final regular revision to fourth quarter GDP. Fourth quarter GDP was revised down marginally to a 6.3 percent drop from the prior estimate of a 6.2 percent annualized decline. The latest number was not as bad as the market forecast for a 6.6 percent fall. The downward revision in real GDP in the fourth quarter primarily reflected lower estimates for inventory investment, nonresidential structures investment, and residential investment. These were partly offset by less negative net exports.

On the inflation front, the GDP price index was unrevised at a 0.5 percent annualized increase and matched the consensus forecast. Headline PCE inflation was revised up to down 4.9 percent while core PCE inflation also was nudged up to 0.9 percent annualized for the fourth quarter.

Year-on-year growth for real GDP was unrevised at minus 0.8 percent and is down from up 0.7 percent in the third quarter. Year-on-year growth for the GDP price index was unrevised at up 2.0 percent, compared to up 2.6 percent in the third quarter.

The latest revisions to GDP were very minor and do not change the view that the economy is still mired in deep recession. Most economists still expect the first quarter decline to be worse. However, focus now is on more current monthly numbers which some are seeing as suggesting an ease in the rate of decline in the second quarter.

Market Consensus before announcement
GDP growth was revised down significantly at the end of February with the Commerce Department's first revision to fourth quarter GDP. Growth was revised to a 6.2 percent decline from the initial estimate of a 3.8 percent drop. The downward revision was primarily due to a sharply lower estimate for inventories and for exports. Turning to inflation, the GDP price index was revised up to plus 0.5 percent annualized from the initial estimate of a 0.1 percent dip.

Definition
Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Why Investors Care

Real GDP growth is always quoted at a quarterly annual rate. It measures how much the economy has grown over a three-month period. Quarterly growth rates are often volatile; consequently, economists also like to look at the year-over-year growth in GDP. The yearly changes tend to be more stable.
Data Source: Haver Analytics

It is common to compare quarterly changes at annual rates in the GDP deflator. These can be volatile, just like the quarterly swings in real GDP growth; as a result, the trend in inflation is better determined by year- over- year changes.
Data Source: Haver Analytics

2009 Release Schedule

Released On: 1/30 2/27 3/26 4/29 5/29 6/25 7/31 8/27 9/30 10/29 11/24 12/22

Release For: Q4a Q4 Q4f Q1a Q1p Q1f Q2a Q2p Q2f Q3a Q3p Q3f

A: Advance P: Preliminary F: Final