The Bureau of Economic Analysis released the advance Gross Domestic Product figures for the third quarter today. Real GDP, adjusted for inflation, fell by an annualized rate of 0.25% in the third quarter 2008 compared to the second quarter 2008. This is better than expected. Economists had expected a 0.50% drop. The second quarter grew by a revised 2.80%. This is the second time in a year that Real GDP has been negative (fourth quarter 2007 declined by 0.17%). Adjusted for both inflation and population, real per capita GDP fell at an annualized rate of 1.19% in the fourth quarter 2007. It barely rose by 0.02% in the first quarter 2008, rose by 1.92% in the second quarter, and fell by 1.28% in the third quarter.
So far the current possible recession has been very mild. However, looking at the numbers behind the GDP reveals a harsher picture. Consumer spending in the third quarter fell sharply by an annualized rate of 3.17%. This is the first drop in personal consumption expenditures (PCE) since the recession of 1990-1991. Real GDP dropped by only $7.4 billion from the third quarter to the second quarter. PCE dropped by $66.1 billion. This was offset by a net increase in exports of $31.1 billion. Helped by the weak dollar, exports rose by $22.3 billion. Recently the dollar has strengthened and the global economies have weakened. Also contributing was a new record for spending on national defense of $550.6 billion in the third quarter. This was an increase of $22.5 billion over the second quarter. In percentage terms of GDP spending on national defense is at the highest level since 1993.
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