Final Sales of Domestic Products Fell Dramatically Too

Via Brad DeLong, CNBC gives us a bad news, good news story on the economy:

The U.S. economy contracted at a surprisingly sharp 6.1 percent rate in the first quarter as exports and business inventories plummeted. The drop in gross domestic product, reported by the Commerce Department on Wednesday, was much steeper than the 4.9 percent annual rate expected by economists and followed a 6.3 percent decline in the fourth quarter … But the sharp drawdown in inventories is good news as it suggests that manufacturers and retailers have reduced the stock of unsold merchandise to manageable levels and could be instrumental in pulling the economy out of recession.

Brad similarly notes:

That means that production this spring will be a full 3.5% below what it was in the second quarter of last year, when it ought to be 3.0% above. The only bright sign is that so much of the decline was a fall in inventories.

To their credit, Brad and CNBC also noted that BEA reported that real final sales of domestic product ,that is GDP less change in private inventories, fell by only 3.4 percent on an annualized basis during the first quarter. The decline during the previous quarter, however, was 6.2 percent. Pardon me – but I don’t see much of a silver lining or a bright sign.