Real GDP and Its Components: 2008QIV versus 2007QIII

BEA released its advanced estimate for the last quarter of 2008 and the news was awful:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 3.8 percent in the fourth quarter of 2008, (that is, from the third quarter to the fourth quarter), according to advance estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP decreased 0.5 percent.

While real GDP rose somewhat during the first two quarters of 2008, real GDP fell a bit during the last quarter of 2007. Real GDP was running at an annualized clip of $11,625.7 billion as of 2007QIII but real GDP for 2008QIV was reported to be only $11,599.4 billion.

I guess the silver lining was that both government purchases and net exports continued to improve. The improvement in real exports was tiny but imports fell – likely as a result of a weaker economy. Consumption demand fell by more than $90 billion – while investment demand fell by more than $190 billion. Maybe this will wake up a few Republicans in the Senate that we have indeed entered into a deep recession.