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Brent Meyer |


Brent Meyer

Brent Meyer is a former economist of the Federal Reserve Bank of Cleveland.


Economic Trends

Real GDP: Fourth-Quarter 2008 Final Estimate

Brent Meyer

The final estimate of real GDP in the fourth quarter of 2008 came in at −6.3 percent (annualized rate), 0.1 percentage points (pp) lower than the preliminary estimate and whopping 2.5 pp below the advance estimate.

Real GDP and Components, 2008:Q4 Final Estimate

Quarterly change,
billions of 2000$
Annualized percent change, last:
Four quarters
Real GDP
Personal consumption
Business fixed investment
Residential investment
Government spending
  National defense
Net exports
Private inventories

Source: Bureau of Economic Analysis.

The primary drivers of the further downward revision in the final estimate were downward adjustments to private inventories, business fixed investment, and government consumption. The change in private inventories was updated to show a 0.1 pp subtraction from real GDP growth, 0.3 pp lower than the preliminary estimate, and 1.4 pp less than the advance estimate. Business fixed investment was adjusted down 0.1 pp from the preliminary to final release, and government consumption ticked down 0.1 pp as well. Tempering the downward adjustments was a 0.3 pp upward revision to real imports, as the decrease in imports deepened to −17.5 percent (annualized rate) from −16.0 percent (imports subtract from output in the GDP calculation; therefore, a decrease in imports adds to real GDP growth).

Recent data on consumption suggest that we might not experience a third consecutive quarter of negative spending growth, which would be a postwar record, even though real personal consumption slipped down 0.2 percent (nonannualized) in February, because an upward revision nearly doubled January’s estimate—from a 0.4 percent increase to 0.7 percent. According to the release, consumption was bumped up due to the recent unexpected strength in the retail sales indicators.

Total retail sales actually declined 0.1 percent in February, but they came in above expectations of a −0.5 percent decline. Excluding motor vehicle and parts dealers, retail sales increased 0.7 percent during the month. This follows a large (upwardly revised) 1.8 percent jump in total retail sales during January. Over the past 12 months, total sales are still down 8.6 percent, though this is somewhat of an improvement over the current cyclical low of −10.5 percent, which occurred in December.

Panelists on the Blue Chip survey continued to revise down their annual estimates for real GDP in 2009. As of the first week of March, they expect a first-quarter decrease of 5.3 percent. There are a couple of encouraging signs in the survey, if the respondents are to be believed. First, their first-quarter estimate is for a slightly less severe contraction. Second, the consensus viewpoint is for the recession to end by midyear (even the average of the 10 most pessimistic respondents is for positive GDP growth by the fourth quarter of 2009).