Economic activity picked up substantially in the third quarter of 2009, after the pace of economic contraction slowed noticeably in the second quarter. Although the economy has stabilized and there are clear signs of recovery in some sectors, improvements to date are modest compared to the declines during the recession. The US economy experienced its first four-quarter contraction since 1991 during the four quarters of 2008, as real gross domestic product (GDP) fell by 1.9%. In 2008, consumer spending -- which accounts for about 70% of GDP-registered its largest four-quarter drop since 1974, falling by 1.8%. Labor market conditions deteriorated throughout 2008 and conditions worsened during the first part of 2009, although the pace of job loss has moderated during the year. Headline inflation peaked at 56% in the year through July 2008, boosted by surging food and energy prices.
3 Profile of the Economy [Source: Office of Macroeconomic Analysis] As of November 12, 2009 Introduction Growth of Real GDP Economic activity picked up substantially in the third (Quarterly percent change at annual rate) quarter of 2009, after the pace of economic contraction slowed noticeably in the second quarter. Although the 8.0 economy has stabilized and there are clear signs of recovery 6.0 4.8 4.8 4.8 in some sectors, improvements to date are modest compared 3.8 3.5 to the declines during the recession. As of November 2009, 4.0 3.0 2.6 2.7 2.8 the recession has lasted 2 years, using the December 2007 2.0 1.3 1.5 0.9 0.8 business cycle peak chosen by the National Bureau of 0.1 Economic Research (NBER). The recession became the 0.0 longest in the post-war period as of April, 2009. -0.2 -0.5 -2.0 -0.7 Headline consumer prices were down on 12-month basis in 7 of the 9 months through September, reflecting the -4.0 substantial decline in oil and commodity prices from peak levels reached in summer 2008. Core inflation (a measure -6.0 -5.4 excluding food and energy prices) has remained contained for -6.4 -8.0 the past several months, and fell to the lower end of recent 2005 2006 2007 2008 2009 ranges in September. Conditions in housing and financial markets have continued to improve from the start made earlier this year. Stock market indexes have trended notably higher In 2008, consumer spending-which accounts for about 70 since early March while Treasury bond yields have remained percent of GDP–registered its largest four-quarter drop since fairly steady. Most economists predict continued growth in the 1974, falling by 1.8 percent. After rising by 0.6 percent in fourth quarter of 2009, and moderate growth through 2010. the first quarter of 2009, and declining by 0.9 percent in the The economy has been supported by a wide variety of second, consumer spending rose by 3.4 percent in the third measures implemented under the American Recovery and quarter, adding 2.4 percentage points to real GDP growth. Reinvestment Act of 2009 (ARRA, or the “Recovery Act”), as Residential investment–mostly residential homebuilding– well as efforts to restore financial stability and improve now accounts for only about 3-1/2 percent of GDP after conditions in housing markets. declining sharply since early 2006. After plunging 38 Growth percent in the first quarter of 2009, residential investment fell by a somewhat more moderate 23 percent in the second The U.S. economy experienced its first four-quarter quarter. Residential investment then surged by more than 23 contraction since 1991 during the four quarters of 2008, as percent in the third quarter. A number of monthly housing real gross domestic product (GDP) fell by 1.9 percent. measures have shown marked improvement. Single-family Although the contraction intensified in the last quarter of 2008 housing starts rose 3.9 percent in September, continuing an and the first quarter of 2009—the fourth quarter decline in real upward trend begun in March. Sales of existing single GDP of 6.4 percent was the largest quarterly contraction since family homes surged 9.4 percent in September and are now 1982–the pace of contraction slowed dramatically in the 24 percent above January’s record lows, even as they remain second quarter, with a contraction of 0.7 percent, the smallest 23 percent below their late 2005 peak. After 5 months of in a year. Real GDP rose 3.5 percent in the third quarter, the uninterr
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