Advance 2Q GDP -1.0%. Government Spending Carries Period As Consumers Tighten.

Advance 2Q2009 GDP came in today at -1%, and combined with 1Q2009 GDP of -6.4%, we’re now entering into our fourth consecutive quarter of economic contraction, something that hasn’t happened in more than 60 years. Consumer spending accounts for two-thirds of GDP, but this 2Q2009 GDP number doesn’t fully represent the severity of the situation—as consumer spending actually dropped -1.2% in the period and government spending increased 5.6%. There are two more 2Q2009 GDP readings coming: the second ‘Preliminary’ reading comes August 27, then the ‘Final’ GDP number comes a month after that. Although the Final number isn’t truly final, because the Final 1Q2009 number last month was -5.5% and today’s report showed that 1Q number revised worse to -6.4%.

As of December 23, 2008, -0.5% GDP was the largest quarterly decline since the tail end of the last recession in 2001. Six days after that release, the NBER declared a recession has been in effect since December 2007 and also countered the popular definition of recession as two consecutive quarters of negative GDP growth, saying that they evaluate many factors in addition to GDP. This falls well in line with the beginning of the credit crunch in August 2007. Below are the last six quarters of final GDP and here is the press release for today’s figures.

4Q2007: -0.2% (final)
1Q2008: +0.9% (final)
2Q2008: +2.8% (final)
3Q2008: -0.5% (final)
4Q2008: -6.3 (final)
1Q2009: -6.4% (final)
2Q2009: -1.0% (advance)