US: Mild GDP decline masks miserable details

[girl gone mad]

Overview: Q3 national account figures revealed a moderate decline in GDP of 0.3% q/q AR (cons: -0.5%, DB: -1.2%), down from the rebate-boosted Q2 growth of 2.8% q/q AR. However, the slightly better-than-expected headline masked much weaker details that leave little doubt that the US economy is now in recession.

Details: While the numbers revealed only a moderate decline in total GDP, this was mostly due to continued but slowing support from foreign demand, a boost from the erratic national defence component in public spending and a modest positive contribution from inventories.

Private domestic demand declined by 3.3% q/q AR. This is the worst performance since the 1991 recession and confirms that the US economy is now in a recession. The weakness in domestic demand is now broadly based, with consumer, business and residential spending contracting. We look for all these sectors to contract further in Q4 and Q1.

Foreign demand held up in Q3, but is clearly on a slowing trend. As most European economies have already entered or will enter a recession, this component is doomed to head into negative territory in the coming quarters.

Assessment & Outlook: The US economy is in a recession and we believe that today's Q3 numbers mark
the onset of three consecutive quarters of negative growth. The economy will not return to positive growth rates before Q2 09.

Danske Bank Invenstment Research (pdf file)

[billyoc]

1. Your link looks weird. Good stuff, though.

I couldn't copy the link from the site,

http://www.danskebank.dk/danskeanalyse

[girl gone mad]

2. Thanks. I updated it.

It should work now.