3Q GDP Down, 4Q Expected to Be Worse

The quarterly report by the U.S. Department of Commerce on the national GDP is something of a lagging indicator. The fact that the U.S. economy contracted 0.5 percent in the third quarter–July to September–might be worrisome, but it only raises the further question of how much contraction will happen in the fourth quarter. The other shoe is bound to drop, and it’s expected to make a bigger thud when it does. Some prognosticators are predicting as much a 6 percent contraction in 4Q08, the steepest drop since 1982. The markets didn’t take the news well, but didn’t melt down either. Perhaps investors are inured to bad numbers now. The Dow Jones index ended down about 100 points, or 1.18 percent, while the S&P 500 declined 0.97 percent, and the Nasdaq declined 0.71 percent. Other countries have reported shrinking economies as well, such as the U.K., contracting 0.6 percent during 3Q08; New Zealand, down 0.4 percent during the same period; and Spain, which has had housing-bubble deflation proportionately as bad as anything in North America, with a 1.5 percent contraction between October and December, according to its Economy Ministry. The U.S. housing market is still asking itself, Where is that bottom? The answer is, We haven’t found it yet. Sales of both new and existing houses were down again in November, and resale prices dropped as well. According to the U.S. Department of Commerce, new-home sales fell 2.9 percent last month to 407,000, the lowest figure since 1991, while median sales prices were down 11.5 percent from November 2007, to $220,400. The National Association of Realtors has also released doleful numbers about the residential real estate market. Existing home sales, including condos, now stand at an annual rate of 4.49 million, down 8.6 percent from last year. American Express Co., a credit card giant that reinvented itself as a bank, is getting a few billion in its Christmas stocking: $3.39 billion, to be exact, from TARP. According to Bloomberg, it joins at least 190 regional banks or other lenders who are seeking at least $75 billion from the Treasury’s second bailout bucket. Among others, Discover Financial Services, which just became a bank last week, wants $1.2 billion from TARP, and Capital One Financial Corp. has preliminary approval for $3.6 billion. Maybe some new Capital One commercials are called for. What’s in our wallet? Taxpayer money. i