1Q08 Economic Conditions: the Good, Bad, and Ugly

By and large, the Bureau of Economic Analysts (BEA) at the Department of Commerce announced this morning an estimated GDP figure for the first quarter of 2008 of 0.6 percent -- the exact same figure as the last quarter of 2007 -- which pushes us back from the brink of "official" economic recession, though we are by no means out of the woods. The BEA report includes this summary analysis: The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE) for services, private inventory investment, exports of goods and services, and federal government spending that were partly offset by negative contributions from residential fixed investment and PCE for durable goods. Imports, which are a subtraction in the calculation of GDP, increased. Note in particular the reference to residential fixed investment, reflecting a contracting housing sector, falling home prices and sales, and a rapid increase in home foreclosures, which are reaching an alarming rate. Per a RealtyTrac report released yesterday: foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 649,917 properties during the first quarter, a 23 percent increase from the previous quarter and a 112 percent increase from the first quarter of 2007 -- one in every 194 U.S. households received a foreclosure filing during the quarter. These two developments, taken together, may mean increased support for targeted housing-sector related legislation now moving through Congress. What it means for broader stimulus measures is uncertain, though the April unemployment report, due out on Friday, may have considerable bearing on prospects for such measures. For additional analysis of the GDP estimate and its contributing factors by Dean Baker, co-director of the Center for Economic and Policy Research, see CEPR's GDP Byte, here
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