GDP and the Economy: Preliminary Estimates for the Fourth Quarter of 2008

REAL GROSS domestic product (GDP) decreased at an annual rate of 6.2 percent in the fourth quarter of 2008, according to the “preliminary” estimates of the national income and product accounts (NIPAs) (chart 1 and table1).1 In the third quarter, real GDP declined 0.5 percent. The fourth-quarter decrease was the largest since the first quarter of 1982. It was revised down 2.4 percentage points from the “advance” estimate (see page 9). The revision, which was large by historical standards, reflected revisions to consumer spending, exports, and inventory investment. The steeper decline in GDP growth in the fourthquarter resulted mainly from a sharp downturn in exports and a larger decrease in investment in equipment and software (see page 2). In contrast, imports decreased much more in the fourth quarter than in the third quarter.2 ●Prices of goods and services purchased by U.S. residents fell 4.1 percent in the fourth quarter after rising 4.5 percent in the third quarter (see page 8). In the fourth quarter, energy prices turned down sharply, and food prices decelerated. Excluding food and energy, gross domestic purchases prices increased 1.1 percent after increasing 2.8 percent. ●Real disposable personal income (DPI) increased 3.4 percent in the fourth quarter; in the third quarter, real DPI decreased 8.5 percent (revised). The upturn reflected a sharp downturn in the PCE implicit price deflator that is used to deflate current-dollar DPI, and a smaller decrease in currentdollar DPI, which decreased 1.8 percent after decreasing 3.9 percent (revised). ●The personal saving rate was 3.2 percent in the fourth quarter, 0.3 percentage point more than the advance estimate; in the third quarter, it was 1.3 percent (revised).