U.S. Q4 GDP down 3.8%, inventories limit downturn
Worst performance since Q1 of ‘82; economy in new territory

WASHINGTON (MarketWatch) - The U.S. economy contracted at a 3.8% annualized rate in the fourth quarter but the decline would have been worse except that the government counts an unwanted buildup of goods on store shelves as growth.

A clearer picture of the scope of the weakness in the fourth quarter, which excludes the inventory buildup, contracted at a 5.1% pace, the weakest in 28 years.

Even with inventories, the growth rate is the worst since 1982.
Today’s report also confirms that the economy has entered new territory with a stunning record drop in headline inflation.

The drop in growth in the fourth quarter was above economists expectations that growth would shrink at a 5.5% annual rate.
But the data cast a negative hue over the current quarter since output is likely to be cut aggressively.

As a result, it will be a bearish report for Wall Street,

The weakness in the fourth quarter was widespread. Declines in consumer and business spending were offset by inventories and government spending. The trade sector made a small positive contribution to growth as a sharp drop in imports was larger than the decline in exports.

Translation: The economy contracted a lot in the 4th quarter, though not quite as bad as had been feared.

On the positive side, things are not as bad as the recession in the early 80’s

On the negative side, we don’t exactly have Ronald Reagan and his pro-growth policies in the White House this time around.