Economy Contracted 1.9% in First 12 Months of Recession
Bloomberg reports that the economy contracted much more in the first 12 months of the recession than previously thought. The economy contract by 1.9% from Q4 2007 to Q3 2008. This is much higher than previously estimated drop of 0.8%.
The world's largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books, the Commerce Department said yesterday in Washington. Gross domestic product has shrunk 3.9 percent in the past year, the report said, indicating the worst slump since the Great Depression.
Updated statistics also showed that Americans earned more over the last 10 years and socked away a larger share of that cash in savings. The report signals the process of repairing tattered balance sheets following the biggest drop in household wealth on record may be further along than anticipated.
"The current downturn beginning in 2008 is more pronounced," Steven Landefeld, director of the Commerce Department's Bureau of Economic Analysis, said in a press briefing this week. The revisions were in line with past experience in which initial figures tended to underestimate the severity of contractions during their early stages, he said.
A contraction of 1.9% is not hard to believe when you look at the large layoff figures, bankruptcies and store closings.
