Today, the Bureau of Economic Analysis (BEA) released second installment of the Q4 2008 GDP report showing a stunning contraction with GDP declining at an annual rate of -6.2%.

Looking at the report more closely it’s easy to see that the quarter was a disaster overall with huge double-digit declines to Durable Goods, Imports (actually a benefit) and Exports as well as Fixed Investment.

Fixed investment provided significant drags on growth with non-residential investment declining -21.1% and residential investment declining -28.8%. Continue reading →

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for January showing continued and eve accelerating deterioration in demand for new residential homes across every tracked region resulting in a startling 48.24% year-over-year decline and a truly horrendous 77.75% peak sales decline nationally.

It’s important to keep in mind that this stunning year-over-year decline is coming on the back of the significant declines seen in 2006, 2007 and 2008 further indicating the enormity of the housing bust and clearly dispelling any notion of a housing bottom having been reached. Continue reading →

By Edward Hugh: Barcelona

According to the 2009 budget Barack Obama is sending to congress today, the United States will have a $1.75 trillion deficit this year. The figure represents 12.3 percent of estimated gross domestic product, double the previous post-war record of 6 percent in 1983, and the highest level since the deficit totaled 21.5 percent of GDP in 1945, at the end of World War II. It seems the numbers are about to start getting let out of the bag, and it will be interesting to see how the markets react. You can find many more details here.

Now if you look at the chart below (prepared by Lazard for a presentation on consumer deleveraging) you will see that this is not the first time something like this has happened. The earlier peak in US indeptedness occured (of course) between 1930 and 1933, when total debt peaked at 299% of GDP. In fact total debt expanded quite rapidly between 1930 (211% GDP) and 1933, largely as a result of GDP contraction and price deflation (which is why it would be preferable not to see extensive price deflation this time round). As a result, while private sector debt contracted between 1930 and 1933, public sector debt held steady, and rose from 34% of GDP to 72% of GDP (for better viewing click on image, and try zooming in a bit. Sorry, that’s the best I can do/suggest).

Continue reading →

Today, the Department of Labor released their latest read of Joblessness showing seasonally adjusted “initial” unemployment claims increased 36,000 to 667,000 from last week’s unrevised 627,000 claims while “continued” claims surged 114,000 resulting in an “insured” unemployment rate of 3.8%. Continue reading →