THE BASIS POINT

Advance 1Q GDP -6.1%. Last 2 Quarters Are Largest Contraction Since 1947

Advance 1Q2009 GDP came in today at -6.1%, and combine with 4Q2008 GDP of -6.3%, these two quarters represent the largest economic contraction since 1947—since then, the economy has never contracted by more than 4% for two consecutive quarters. There are two more readings due for 1Q2009: the ‘Preliminary’ reading that follows today’s report comes out May 29, and the ‘Final’ 1Q2009 reading comes out one month after that.

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. Below are the last five quarters of final GDP here is today’s GDP press release.

4Q2007: -0.2% (final)
1Q2008: +0.9% (final)
2Q2008: +2.8% (final)
3Q2008: -0.5% (final)
4Q2008: -6.3 (final)
1Q2009: -6.1% (preliminary—next reading May 29)