US Economy declines at an annual rate of 0.5 percent in the third quarter of 2008

US Economy is clearly slowing down. Christmas season this year will not be as happy as last year:

- 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 0.5 percent in the third quarter of 2008, (that is, from the second quarter to the third quarter), according to final estimates released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.8 percent when tax rebates temporarily helped fuel demand.
- Consumer spending shrank at a 3.8 percent pace for the sharpest pull-back since 1980, when a global oil crisis tipped the economy toward a prolonged slowdown
- Investment in equipment and software slumped 7.5 percent for the largest decline since early 2002.
- Third-quarter corporate profits fell 1.2 percent, the fifth consecutive quarter of decline. Nonfinancial corporate profits increased 6.7 percent, but financial corporate profits fell 20.0 percent.
- Residential investment contracted 16 percent at an annual pace in the third quarter, which was slightly less than previously estimated and subtracted 0.6 percentage points from overall growth.
- Expenditures on durable goods fell 14.8 percent, subtracting 1.16 percent from growth. A large chunk of this fall was due to declining demand for motor vehicles, which reduced overall growth by 0.83 percent in the third quarter.
- The International Council of Shopping Centers and Goldman Sachs said their chain store sales index rose 2.6 percent in the week ended December 20, although the year-on-year decline deepened to 0.6 percent. In contrast, the Johnson Redbook sales index showed a month-to-date decline of 1.1 percent, with sales for the December 20 week 1 percent below their year-ago level.

Other countries are not immune to economic slowdown:
- The British economy shrank by 0.6 percent in the third quarter, the worst quarterly decline since 1990 and worse also than the earlier 0.5 percent estimate.
- New Zealand's economy declined by a seasonally adjusted 0.4 percent in the third quarter, the biggest drop in eight years, following a 0.2 percent fall in Q2.
- Spain succumbed to recession for the first time in 15 years. Spain's ISA activity indicator, which tracks gross domestic product, contracted 1.5 percent year-on-year between October and December, according to Economy Ministry data.

Sources:
- BEA, Dec 23, 2008: Q3-2008 US Economy News Release
- Reuters, Dec 23, 2008: GDP shrank in third quarter as economy chilled
- Reuters, Dec 23, 2008: Spain joins recession club