I must be reading the wrong blogs -- or the right ones -- because while both Bloomberg News and the Wall Street Journal are asserting that the 6.1 percent drop in the gross domestic product (GDP) reported for the first quarter of 2009 by the Commerce Department on Wednesday was "worse than expected," I looked at the numbers and thought, hmm, not as bad as I feared.
Which is not to say that the numbers aren't bad. Bloomberg tells us that the U.S. economy has now had its worst six months since 1957-58. The Wall Street Journal informs us that this is the first time the U.S. economy has contracted for three straight quarters since 1974-75. I don't think most people need much confirmation that the economy is in really bad shape, but still, those are historic indicators.
1) Much attention is being devoted to a 2.2 percent rise in consumer spending, compared to a 4.3 percent drop in the fourth quarter of 2008. The March numbers for consumer spending aren't released until after the first GDP estimate, but my reading of the February report suggests that January's numbers were considerably better than February's. I'm a bit baffled as to how March could have seen an uptick big enough to account for the overall quarterly rise, because I would have expected that with the ongoing huge month-to-month job losses, consumers have to be retrenching. If consumer spending does continue to grow, however, that's a good sign, because businesses have slashed their inventories to rock-bottom levels. Any increase in demand will result in immediate production increases.
2) Despite all the negative attention devoted to the big spending Obama government, government spending fell by a pretty sharp 3.9 percent in the first quarter of 2009. Bloomberg says that "the drop reflected cutbacks in defense spending and the biggest decrease in state and local government outlays since 1981." This means a) the stimulus spending isn't getting disbursed quickly enough, and b) the federal government's aggressive efforts to boost demand aren't keeping up with collapsing state economies.
Finally, if you really want a gloomy take on the prospects for the entire global economy, you won't find a more dour one than Willem Buiter's lengthy analysis in the Financial Times. The only consolation I could find to take from it is that Buiter is always dark and pessimistic. But his analysis is also compelling.