GDP Shrank 1% In 2Q; Decline Is Much Less Than In Previous Quarters
Will more signs like this soon appear? Spencer Platt./Getty Images hide caption
The nation's economy shrank at a 1% annual rate in the second quarter of the year, the Commerce Department just reported.
While that marks the fourth consecutive quarterly decline in output of goods and services, the news isn't all bad.
The shrinkage was less severe than in the previous two quarters -- GDP declined at annual rates of 6.4% in first-quarter 2009 and 5.4% in fourth-quarter 2008 (both of those figures have been revised from previous estimates).
The news also comes as several other key indicators, such as home sales and jobless claims, have shown signs they may be bottoming out.
Officially, the U.S. economy has been in recession since December 2007. Recessions are generally defined as two or more consecutive quarters of declines in output, employment, sales and other key indicators.
As this chart at the National Bureau of Economic Research (a private organization that has the official say on when recessions begin and end) and this chart at Commerce.gov show, the ends of recent recessions have not always coincided with quarters when GDP began expanding again.
-- In 2001, a recession officially ended in October. That quarter, GDP grew at a 1.6% annual rate.
-- In 1991, a recession officially ended in February. That quarter, GDP shrank at a 2% annual rate.
-- In 1982, a recession officially ended in October. That quarter, GDP grew at a 0.4% annual rate.
-- In 1980, a recession officially ended in June. That quarter, GDP shrank at a 7.8% annual rate (and shrank again the following quarter, at a 0.7% annual rate).
The message: GDP is just one indicator of the economy's strength, and GDP growth often lags even as other measures of economic health (jobs, sales, imports, etc.) begin to pick up.
Trying to follow the economy's ups and downs? So is Planet Money.
Update at 1:45 p.m. ET. As we report here, President Barack Obama has declared that the GDP report shows that things were worse than previously thought when he took office -- but that he's now optimistic about the direction the economy is headed. Here's the audio of his latest comments:
Update at 9:35 a.m. ET: Just after the opening bell of the New York Stock Exchange, stocks dipped slightly before then turning positive. At this moment, the Dow Jones industrial average is up about 20 points.
Update at 9:20 a.m. ET. NPR's John Ydstie notes that while this is the first time since the Commerce began keeping such records in 1947 that GDP has fallen for our straight quarters, the second-quarter results were a "huge improvement compared to the first three months of 2009." And, he reports, "cuts by businesses slowed and government spending helped support economic activity":
Update at 8:58 a.m. ET: As always, many eyes will be on the financial markets to see how they react. Reuters reports that:
European shares turned negative on Friday afternoon, after the U.S. government said the economy contracted more than previously reported in the first quarter.
Commerce had previously estimated GDP declined at a 5.5% annual rate the first three months of the year, not the 6.4% pace it now reports.
The New York Stock Exchange opens at 9:30 a.m. ET.
It's always important to note that Commerce revises its GDP numbers several times (and each year goes back to redo its historical tables as well). Its next swing at the second-quarter GDP figures is due for release on Aug. 27.
Update at 8:40 a.m. ET: The Associated Press' take on the news is that GDP made "a better-than-expected showing that provided the strongest signal yet that the longest recession since World War II is finally winding down."