GDP Fell 1% in Second Quarter

Kurt Brouwer July 31st, 2009

The Commerce Department reported today that Gross Domestic Product declined in the second quarter at an annualized rate of 1%.  This is the fourth negative quarter in a row [emphasis added]:


Real GDP declined 1.0 percent at an annual rate in the second quarter, better than the private-sector expected drop of 1.5 percent. This decline is noticeably less than the larger decreases of 5.4 percent in the fourth quarter of 2008and 6.4 percent in the first quarter of 2009. The revisions to 2008 data suggest that the economic slowdown was greater in that year than previously measured, with real GDP falling 1.9 percent during the four quarters of 2008 rather than 0.8 percent as was previously reported.

This was the first time that we have seen four consecutive quarterly declines in economic activity in a long, long time.  Reuters reports:

…With the contraction in the second quarter, U.S. GDP has fallen for four straight quarters for the first time since government records started in 1947.

That’s quite an interesting statistic about GDP decline.  There was a very large decline in 1946, but the economy rebounded quickly.

Here is a chart from the Bureau of Economic Analysis that shows the last year’s quarter-by-quarter decline:

bea-q2-09.JPG

Source: Bureau of Economic Analysis

The contraction in economic activity is slowing and could well turn positive in the next quarter.  Unemployment is still very high and I don’t think that will turn around very much until next year.

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2 Responses to “GDP Fell 1% in Second Quarter”

  1. # Mark A. Sadowskion 31 Jul 2009 at 3:15 pm

    Kurt,
    We don’t have quarterly GDP figures for the contractions of 1946, 1937-1938 or 1929-1933 of course, but I’ll fathom a guess that the first two of these contractions were probably briefer so this probably is the first full year of declining GDP since the contractionary phase of the Great Depression.

    It also is a 3.9% decline from peak in quarterly GDP so this now beats the 1958 recession in that regard and so this is the greatest decline in quarterly GDP since the post-WW II recession.

  2. # Kurt Brouweron 31 Jul 2009 at 4:45 pm

    Mark–if memory serves, the post WWII decline in GDP was approximately 13%. Short, but very steep.

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