Economic Output Contracts for First Time Since 1993

Chart of the Week for November 2-8, 2001

The preliminary Gross Domestic Product (GDP) figures indicate the economy shrank at an annualized rate of 0.4% in the third quarter, considerably less than anticipated. The final reading will be released in December and could be significantly different. GDP measures the value of all goods and services produced in the United States. This is the first contraction in more than eight years and offers the clearest evidence yet that we may be headed for a recession (typically defined as two consecutive quarters of negative growth). Reduced business spending accounted for much of the contraction, and its outlook provides little encouragement. For their part, consumers continued spending and the housing market remained solid, though each may be softening. However, given the Federal Reserve’s aggressive interest rate policy and the pending stimulus package in Congress, some economists believe the foundation for growth is in place. Others aren’t so optimistic, predicting a significant downturn. Only time will tell.

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