GDP Bests Predictions, Recession Deepensby Tim Manni
While most economists forecast a 5.4% decline in the nation’s gross domestic product (GDP), a measurement of the country’s total output of goods and services, the growth indicator contracted less than market observers feared.
The 3.8% decline, despite beating predictions, is still the worst drop in 27 years — the most since the first quarter of 1982.
We’ll avoid bogging you down with the plethora of negative stats that accompany the report. Instead, what are the experts predicting in terms of economic growth for the future?
Job losses will persist through most of this year, and the unemployment rate will peak at above 9% in the middle of 2010.
On the other hand, Moody’s seems to be rather more confident than many of the president’s critics regarding the positive economic impact of federal spending:
Aggressive action by the federal government and the Federal Reserve will eventually lead to renewed growth toward the end of 2009. A massive federal stimulus bill, including aid to households and state governments, spending on infrastructure and tax cuts, will put people back to work, restore confidence, and boost spending.
The Fed is also taking unprecedented steps to boost growth. It has provided massive amounts of liquidity to the financial system and cut short-term interest rates as much as it can. Now it is engaged in quantitative easing, basically printing money to purchase various types of securities in an effort to bring down longer-term rates and spur growth. These steps will eventually lead to recovery, but in the meantime the economy will experience a very deep recession.