Although I've personally believed America has been in recession since at least March, GDP data now confirms that the American economy is indeed contracting.
I will update this post frequently.
http://www.bloomberg.com/...
U.S. Economy Contracts Most Since the 2001 Recession (Update1)
By Shobhana Chandra
Oct. 30 (Bloomberg) -- The economy suffered its biggest decline since 2001 in the third quarter, ushering in what may be worst recession in a quarter century and boosting the chances of Barack Obama and his fellow Democrats in next week's elections.
Gross domestic product contracted at a 0.3 percent annual pace, less than forecast, a Commerce Department report showed today in Washington. The last major economic data before the election also showed that a record two-decade consumer spending boom ended last quarter as the credit crunch deepened.
The Federal Reserve yesterday warned of further ``downside risks'' even after cutting interest rates twice this month and pumping billions of dollars into markets.
I think the biggest downside risk to the economy would be that John McCain is elected the next President of the United States. Economies go in cycles but the worst part about this particular contraction at this particular time is the deep, deep budget hole that the American government finds itself in. Conservative fiscal policies made NO effort what so ever to try and contain the budget deficit. Now the American economy finds itself in a very toxic economic environment with no room to maneuver.
``The crisis really kicked up in late September,'' Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. in New York, said in a Bloomberg Television interview. ``We're going to be looking at a very unfriendly GDP number in the fourth quarter, with a drop of 2 to 4 percent.''
The economic slump coincided with Democratic presidential nominee Obama's lead in public-opinion polls. A Bloomberg/Los Angeles Times survey taken Aug. 15-18 showed Republican nominee John McCain with 42 percent support to Obama's 41 percent; five weeks later, as the credit crunch deepened, the poll showed Obama leading by 49 percent to 45 percent.
Stocks, Treasuries
Stock-index futures, which were up earlier in the day, remained higher after the GDP report. Futures on the Standard & Poor's 500 Stock Index rose 3.5 percent to 959.20 at 8:39 a.m. in New York. Benchmark 10-year Treasury note yields rose to 3.94 percent from 3.86 percent late yesterday.
The Federal Reserve yesterday warned of further ``downside risks'' even after cutting interest rates twice this month and pumping billions of dollars into markets.
The slump last quarter was the biggest since the third quarter of 2001, and follows a 2.8 percent growth rate the previous three months. The economy contracted at a 0.2 percent pace in the last three months of 2007.
Consumer spending dropped at a 3.1 percent annual pace, the first decline since 1991 and the biggest since 1980, after President Jimmy Carter imposed credit controls. The median forecast was for a 2.4 percent drop.
Worse yet is that spending is way, way down. You have to go all the way back to 1950 to see numbers this bad. Americans are freaking out and pulling back on spending. Lower gas prices DO NOT seem to be shifting the savings to spending in the rest of the economy. Either family's don't have the money, which more than likely seems to be the case or more and more people are saving all they can as they try and brace themselves for the storm ahead. Probably a bit of both and both making problems for the American economy worse.
Worst Since 1950
The 6.4 percent rate of decline in spending on non-durable goods, like clothing and food, was the biggest since 1950.
Cutbacks in investments in business equipment and less spending on residential construction projects also contributed to last quarter's contraction.
A narrower trade deficit and a smaller decline in inventories prevented a deeper contraction. Excluding those two categories, the economy would have contracted at a 1.8 percent pace, the most since 1991.
Across the board, inflation is spiking everywhere. I think companies are figuring to pass the increases onto those that can pay and not try to prop up profits on volume sales. The sales aren't there, make a profit on what we do sell. I've personally noticed it on some of the simplest things you can think of, 18lb bag of cat food up almost $2, our favorite dishwasher soap up like 15%, I could go on and on. My wife and I regularly comb through the ads and try to catch every last thing we need on sale. The Fed is predicting that inflation would ebb, maybe certain things like gas prices, till the summer but other things seem to be going up huge.
Fed's Outlook
``The intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit,'' the Fed's statement said. ``The pace of economic activity appears to have slowed markedly.''
Since I work in the auto business, this is especially horrible news. Not like things haven't been bad in Michigan for like 5 years now but Jeez, just punch us in the stomach why don't you. And it's quite obvious that low gas prices now aren't going to help Detroit turn the corner. Sharply lower gas prices seem to indicate the overall weakness of the American economy. That or the oil companies are so freaked out over an Obama presidency that they are slashing prices in a last ditch effort to help John McCain. If gas prices spike next week, no matter who wins, we'll know why.
Industry figures showed cars and light trucks sold at a 12.5 million annual pace in September, the fewest since 1993. October sales may drop to an 11 million pace, according to a Deutsche Bank AG estimate.
``These are truly unimaginable times for our industry,'' Robert Nardelli, chief executive officer of Chrysler LLC, said in a statement last week. The third-largest U.S. automaker will cut 25 percent of salaried workers and reduce production.
In conclusion, the worst news of all is that American incomes have dropped at the fastest pace since records began in 1947. Shit, crap, F$@#.
Trickle down? It's been raining sledgehammers. Republican voters are whining that we want to punish millionaires that are most able to help the economy, where's the help? Millionaires and conservatives got everything they wanted and the economy is in the ditch, buried in mud.
Incomes after taxes and adjusted for inflation dropped at the fastest pace since comparable record began in 1947, today's GDP report also showed. The 8.7 percent decrease followed an 11.9 percent jump in the previous three months and reflected the influence of the tax rebate payments from the government's economic stimulus plan.