MarketWatch: GDP revisions hint at recession

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U.S. economy suffers fourth-quarter contraction
Revisions show spending slower, profits higher than previously thought
By Rex Nutting, MarketWatch




WASHINGTON (MarketWatch) -- The U.S. economy contracted in the fourth quarter of 2007, the first quarter of negative growth since the 2001 recession, the Commerce Department said Thursday in its annual revision to gross domestic product.

Real GDP fell 0.2% in the quarter; a 0.6% increase had previously been reported. Many economists who think the economy is in recession believe it began in the fourth quarter.

Growth in the first quarter of 2008 was revised down a tenth of a percentage point to 0.9%. The economy grew 1.9% in the second quarter, the department said. See full story.

It's a common (but mistaken) belief that a recession is defined by two consecutive quarters of negative GDP.

The revisions encompass better and more up-to-date data from sources not available when the government fixes its quarterly estimates. Read the full report.

Recession redefined

It's a common (but mistaken) belief that a recession is defined by two consecutive quarters of negative GDP.

The actual working definition is "a significant decline in economic activity lasting more than a few months," usually seen in GDP as well as monthly data on job growth, income growth, industrial output and business sales. All four of the monthly indicators are flashing recession signs.

The fourth quarter was particularly weak. Gross domestic purchases -- a gauge of domestic demand -- fell at a 1% annual rate, the biggest drop in 17 years. Another measure of domestic spending -- final sales to domestic purchasers -- fell 0.1%, the first decline since 1991. Consumer spending rose at a 1% annual rate, the slowest growth since 1995, while investment in housing fell at a 27% annual rate, the worst decline since 1981. ......(more)

The complete piece is at: http://www.marketwatch.com/news/story/commerce-dept-concedes-us-economy/story.aspx?guid=%7BB40570D2%2D40FB%2D45BD%2D8920%2DFEC19E1A1F26%7D