THE BLOG
04/03/2009 05:12 am ET | Updated May 25, 2011

Fourth Quarter GDP Looks Terrible

At the end of last week, the BEA released its updated version of 4th Quarter GDP. The short version is simple: there is no good news in this report.

Personal consumption expenditures fell out of bed for the last two quarters, dropping 3.8% and 4.3% respectively. Also note the preceding three quarters (4Q07 - 2Q08) were weak as well, with growth of 1%, .9% and 1.2% respectively. And the two quarters before that (2Q07 and 3Q07) came in at 2%. In other words, PCEs have been weakening for one and a half years.

Let's look at this from two more angles.

The above chart is the chart for the raw total of PCEs. Notice the latest drop-off is the largest in over 45 years. In and of itself, that should raise concern.

But also notice the steep drop-off in the year over year numbers. That's also the largest drop-off we've seen in the last 45 years.

Gross private domestic investment is made-up of three sub-categories: residential and non-residential structures and equipment and software investment. First, here's the total of all real gross private domestic investment:

The macro-number has been weak for 8 of the last 11 quarters. And one of the three positive quarters (3Q08) had a .4% growth rate. In other words, it wasn't anything to write home about.

Let's take a look at the sub-components.

Real private residential fixed investment has fallen off a cliff for the last few years. The reason are clear: residential real estate construction is also falling off a cliff.

It's interesting that on the year over year level we've seen rates of decline at similar levels.

Real private non-residential fixed investment is also dropping, but it is nowhere near the levels of the residential sector. However, also note it has only been dropping since the actual beginning of the current recession (December 2007). As a result

The year over year rate of decline is dropping but isn't at previous levels yet either. However -- I think the operative word there is "yet".

Equipment and software investment has been dropping, both on a quarter over quarter basis and year over year basis.

So -- the problems in investment started in the residential area, but have since moved to all major subgroups. In addition, at the macro level, the drop in residential investment has been strong enough to make 8 of the last 11 quarters negative. In other words -- it's been bad for sometime.

Exports were the one solid performer -- until last quarter when they dropped over 20%. Imports dropped as well due to the lack of consumer demand.

The bottom line is simple: there is no area of the economy looking good right now.