Q4 2008 GDP Could Decline by 5% (Annualized)

I very roughly estimate that Q4 GDP will decline by 5% (annualized). I base this on the export component of the October ISM. The ISM was released earlier this week. According to the report, exports in October collapsed.

When Q 3 GDP early estimates were released there were two components that held up well. One was exports and the second was government spending. The consumer component dropped by about 3%. With exports collapsing and the US consumer collapsing the Q 4 GDP rate of change is likely to be severely negative.

Of course, government spending could spike particularly if there is a new stimulus plan. But how long can the government "hold" up GDP? The US consumer makes up 72% of US GDP. Until the US consumer recuperates this economy is likely to decline.

I am saddened by the news and believe that eventually things will get better. It is just that it is going to take a lot of time for that to happen. But eventually things will pick up. For the time being, we slog our way through this very difficult stretch.