Economic Decline Revised Upward

Real gross domestic product decreased at an annual rate of 5.7 percent in the first quarter, according to preliminary estimates released Friday by the Bureau of Economic Analysis.

The decline was a bit better than the 6.1 percent the BEA estimated last month and a step back from the fourth quarter’s 6.3 percent slide, the biggest drop in 25 years. Nevertheless, the January to March period was the second consecutive quarter of deep declines and extended the recession into the longest one since World War II.

Exports led declining business activity. Sales of equipment and software were down, as were private inventory investment and both nonresidential and residential building. But personal consumption of durable goods began to pick up as consumer confidence gained ground. A large decrease in imports did nothing positive for the transport industry but it did partly offset the decline in GDP.

Motor vehicle output subtracted 1.36 percentage points from the first-quarter change in real GDP after subtracting 2.01 percentage points from the fourth-quarter change. Final sales of computers added to the result after subtracting in the previous quarter.

More home sales and a slower pace of layoffs offer signs of hope for the second quarter. Federal Reserve Chairman Ben Bernanke has offered a prediction that the recession will end this year. FTR Associates is forecasting the economy will stabilize in the third quarter, followed by a moderate recovery in 2010 with GDP growth estimated to rise 2.7 percent.

Contact Thomas L. Gallagher at tgallagher@joc.com.