blind_html Fwd: Recession 2X Worse Than Prior Estimates, Revisions Show

  • From: Nimer Jaber <nimerjaber1@xxxxxxxxx>
  • To: blind_html <blind_html@xxxxxxxxxxxxx>
  • Date: Fri, 31 Jul 2009 22:07:47 -0600

---------- Forwarded message ----------
From: Travis <baconlard@xxxxxxxxx>
Date: Fri, 31 Jul 2009 17:52:13 -0500
Subject: Recession 2X Worse Than Prior Estimates, Revisions Show
To: baconlard@xxxxxxxxx

http://www.bloomberg.com/apps/news?pid=20601087&sid=aNivTjr852TI

*Recession Worse Than Prior Estimates, Revisions Show*




By Bob Willis

July 31 (Bloomberg) -- The first 12 months of the U.S. recession saw the
economy shrink more than twice as much as previously estimated, reflecting
even bigger declines in consumer spending and housing, revised figures
showed.

The world’s largest economy contracted 1.9 percent from the fourth quarter
of 2007 to the last three months of 2008, compared with the 0.8 percent drop
previously on the books, the Commerce Department said today in Washington.

“The current downturn beginning in 2008 is more pronounced,” Steven
Landefeld<http://search.bloomberg.com/search?q=Steven+Landefeld&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>,
director of the Commerce Department’s Bureau of Economic Analysis, said in a
press briefing this week. The revisions were in line with past experience in
which initial figures tended to underestimate the severity of contractions
during their early stages, he said.

The updated statistics also showed that Americans earned more over the last
10 years and socked away a larger share of that cash in
savings<http://www.bloomberg.com/apps/quote?ticker=PIDSDPS%3AIND>.
The report signals the process of repairing tattered balance sheets
following the biggest drop in household wealth on record may be further
along than anticipated.

Spending Slumps

Consumer spending, which accounts for 70 percent of the economy, decreased
1.8 percent in last year’s fourth quarter from the same period in 2007,
exceeding the prior estimate of a 1.5 percent drop. Purchases also began
sinking sooner than previously projected, registering their first decline at
the start of 2008 rather than in the second half.

Treasuries headed higher after the report, while stock- index futures
declined. Benchmark 10-year note yields were at 3.58 percent at 8:51 a.m. in
New York, from 3.61 percent late yesterday. Contracts on the Standard &
Poor’s 500 Stock Index were down 0.3 percent at 979.

Residential construction fell 21 percent during the period, almost 2
percentage points more than previously reported, aggravating what was
already the worst slump since the Great Depression.

The Commerce Department also reported today that the economy contracted at a
1 percent annual rate from April through June after shrinking at a 6.4
percent pace in the first quarter, the most since 1982. The decline in the
first three months of the year was previously reported as 5.5 percent.

Recession’s Start

The National Bureau of Economic Research, the accepted arbiter of U.S.
business cycles, last year determined the recession started in December
2007. The private group is based in Cambridge, Massachusetts,

Today’s updates are part of comprehensive revisions that take place about
every five years and are more extensive than the changes announced at this
time each year. Figures as far back as 1929 can be revised.

Over the most recent period, the third quarter of 2008 underwent one of the
biggest changes, going from a 0.5 percent decrease in gross domestic product
to a 2.7 percent drop. The new reading better illustrates the effect the
September collapse of Lehman Brothers Holdings Inc. had on the economy and
credit markets.

The deeper deterioration last year underscores why Federal Reserve Chairman Ben
S. 
Bernanke<http://search.bloomberg.com/search?q=Ben+S.+Bernanke&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>and
his colleagues at the central bank cut the benchmark rate to a record
low and extended credit to non-banks for the first time since the 1930s.

The new GDP data also help explain why the unemployment rate shot up 2.3
percentage points last year, the biggest annual jump since 1982.

2001 Recession Milder

The revisions showed that the 2001
recession<http://www.nber.org/cycles/cyclesmain.html>was less severe
than originally estimated, reflecting a smaller decline in
business investment. The economy actually grew 0.1 percent from the fourth
quarter of 2000 to the third quarter of 2001, erasing the 0.2 percent drop
previously reported.

Personal income was revised up over the last decade, after the government
boosted its adjustments for the underreporting and non-reporting of income
using more recent data from the Internal Revenue Service. The increases in
the most recent years reflect gains from rents, interest and proprietors’
income. The government changed the way it accounts for natural disasters,
such as Hurricane Katrina, eliminating much of the prior volatility in
income calculations.

More Savings

Higher incomes and less spending translated into bigger savings. The savings
rate for 2008 was revised up to 2.7 percent from 1.8 percent. The rate shot
up to 5.2 percent in the second quarter, the highest level since 1998.

The government revised corporate profits down for 2006-2008 and up for 2004
and 2005.

Finally, Commerce shifted food services, which include meals purchased at
restaurants or served in schools, out of the food category. As a result, the
Fed’s preferred inflation gauge -- which tracks consumer spending and
excludes food and fuel -- was pushed up by 0.2 percentage point for the
three-year period from 2006 to 2008.

The costs of meals away from home are not as volatile as fresh food, the
government said, and therefore services should be included in the measure
commonly known as the core index.

To contact the reporter on this story: Bob Willis in Washington at
bwillis@xxxxxxxxxxxxx

__,_._,___

--~--~---------~--~----~------------~-------~--~----~
You received this message because you are subscribed to the Google
Groups "Politics & Current Events" group.
To post to this group, send email to politics-current-events@xxxxxxxxxxxxxxxx
To unsubscribe from this group, send email to
politics-current-events+unsubscribe@xxxxxxxxxxxxxxxx
For more options, visit this group at
http://groups.google.com/group/politics-current-events?hl=en
-~----------~----~----~----~------~----~------~--~---
blind_html
To unsubscribe, please send a blank email to
blind_html-request@xxxxxxxxxxxxx
with unsubscribe in the subject line.
To access the archives, please visit:
http://www.freelists.org/archive/blind_html

Thanks

Other related posts:

  • » blind_html Fwd: Recession 2X Worse Than Prior Estimates, Revisions Show - Nimer Jaber