New economic numbers are ugly

The government has posted its revised GDP numbers for the last three months of 2008, and they are ugly – a 6.2% annualized rate of decline. I link to the New York Times story on the GDP, which includes this nugget:

Among the more distressing aspects of the report, according to Joseph Brusuelas, a director at Moody’s, were the numbers for business investment. Investment in equipment and software, for example, fell at an annualized rate of 28.8 percent.

“We’re not going to have a consumer-led recovery out of the recession,” Mr. Brusuelas said. It will instead be led by the technology industry and businesses’ spending on capital investments he said, which makes the fourth quarter G.D.P. figures numbers “somewhat troubling.”

So, to emphasize what is said here, consumers will not save the economy (an idea I criticized in a post yesterday), and businesses will have to pick up the slack. I wonder where Cat will fit into this picture.

Also, just to build on something from my postscript in that same post yesterday, the article says “the last quarter of 2008 was the worst since the 1982 recession.” Let’s keep in mind that today’s numbers might be similar to the early-80s recession, but these two recessions are not at all the same. The early-80s recession was caused by the Federal Reserve cranking up interest rates to kill the economy in order to kill inflation. That recession was also ended by the Fed reducing interest rates once it felt inflation was dead. This time around the Fed is already at zero-percent interest rates, and we’re still struggling. Hence, the need for the stimulus bill.

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