U.S. Economy Shrank 6.3% in Fourth Quarter as Profits Fell Most Since 1953

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U.S. Economy Contracts 6.3%, Profits Decline 16.5% (Update1)
By Shobhana Chandra


March 26 (Bloomberg) -- The U.S. economy shrank in the fourth quarter more than previously estimated, leading to the biggest plunge in corporate earnings in a half century and underscoring why companies are slashing payrolls this year.

Gross domestic product contracted at a 6.3 percent annual rate from October to December, the weakest since 1982, the Commerce Department said today in Washington. Profits dropped 16.5 percent from the prior quarter, the most since 1953.

The economy has lost more than 1.2 million jobs this year as companies trim costs and rebuild profits. Recent reports showing a rebound in sales indicate last quarter’s slump may give way to smaller declines in growth. A let-up in the recession would set the stage for President Barack Obama’s stimulus plan and Federal Reserve measures to take hold in the second half.

“It’s a pretty dismal result,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. “Given the slight improvement we’re seeing in some of the recent indicators, I suspect the first quarter will be a little better than the fourth.”

The drop in GDP, the sum of all goods and services produced, was larger than the 6.2 percent decline estimated by the Commerce Department last month. The median forecast of 69 economists in the Bloomberg survey called for a 6.6 percent decrease, and estimates ranged from declines of 7.1 percent to 6 percent. .........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601068&sid=acMfR.4T_Nfc&refer=home

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1. Buy your, "Thanks, President Bush" bumper stickers here.